Description
Other authors see employee relations as dealing only with non-unionized workers, whereas labor relations is seen as dealing with unionized workers.
Rose Ryan
Market Rules: Industrial Relations in Hotels and Restaurants
Rose Ryan
Abstract: In recent years, various commentators have pointed out the need to examine the nature of industrial relations in the service sector. This paper reports evidence from a multimethod study of workplaces in the Accommodation, Cafes and Restaurants industrial sector, which in New Zealand makes an increasingly significant contribution to employment and economic growth. Despite the stereotype of the industry as highly casualised and low-skilled, the research suggests that a variety of management approaches to industrial relations can be discerned in respect of the nature of the employment relationship, the approach to collectivism and the structure and content of employment contracts.
Introduction
The environment surrounding the Employment Contracts Act (ECA) in New Zealand has been controversial since its passage in 1991. Much has been claimed for the Act, including increased levels of employment and productivity, and a reduction in industrial action. While some of these claims are difficult to prove or disprove (see for example, Henning, 1995; Yeabsley and Savage, 1996), an indisputable feature of change during the 1990s has been a decentralisation of industrial relations to the level of the workplace. The most common type of collective employment contracts are those established at an enterprise level (Industrial Relations Service, 1996; Harbridge and Crawford, 1996) and it has been estimated that just under a third of the workforce are employed under individual employment contracts (Statistics New Zealand, 1993). Despite this change, employer approaches to industrial relations in the past five years are still a matter for debate. While some have claimed that the Act has allowed more positive relationships to develop between employers and employees, others have argued that the Act has facilitated a more aggressive approach to industrial relations based on exercise of unconstrained managerial prerogative. Attempts have been made to estimate the spread of various practices (see for example Boxall, 1993, 1995; Heylen Research Centre, 1992, 1993), but in general little is known about the ways in which individual employers have approached the transition to enterprise-based bargaining. The service sector in general, and the hospitality industry in particular, is generally used to illustrate the ways in which employers have made use of new-found freedoms to take advantage of workers in a disadvantaged labour market position (Gosche, 1992; Harbridge and Street, 1995). While these studies are important in providing an understanding of the impact of the Act from an employee perspective, at the same time, they paint only a partial picture of the dynamics of workplace industrial relations. This paper aims to reduce this gap, reporting evidence from a multimethod study of labour, employment and work in the hospitality sector in New Zealand. It suggests that the image of the industry as unitarist and exploitative must be rejected in favour of a more complex picture of patterns of industrial relations.
Management practice in industrial relations
Changes in the balance of bargaining advantage in the 1970s and 1980s saw employer industrial relations practices being more commonly included on the industrial relations research agenda. While space considerations do not permit a review of these in this paper, several typologies of management practice were developed (see for example, Purcell, 1987; Guest, 1990; Marchington and Parker, 1990; Purcell and Ahlstrand, 1993) which suggested that approaches to industrial relations in different workplaces varied according to workplace size, ownership, product market conditions, and technological and operational considerations. While many commentators argued that the 1980s saw a shift from collectivism to individualism, and a corresponding decline in trade unions and collective bargaining, Purcell and Sisson (1983) argued that some employers had adopted policies which promoted the interests of employees as individuals, while still working with trade unions. Conversely, continuing collectivism did not guarantee protection of worker interests. 311
Rose Ryan This argument has formed the basis for several further typologies of management practice which make a distinction between management approaches to employees as individuals (specifically the extent to which employees are treated as a valued resource or as a commodity) and as a collective (particularly whether a co-operative or adversarial approach is adopted). This may be represented diagrammatically as seen in Figure 1.
Employee as resource
Employee development
Sophisticated human relations
Consultative
INDIVIDUALIS M
Paternalis m
Traditional paternalism Bargained constitutional Traditional
Employee as commodity
Labour control and cost minimisation
None (Unitary)
Adversarial COLLECTIVISM
Figure 1: Management approaches to industrial relations (Source: adapted from Purcell, 1987; Purcell and Ahlstrand, 1993; Storey and Sisson, 1994.) The possibility that employers may adopt a variety of approaches to employees as individuals and as collectives gives rise to the likelihood of a wide range of managerial practices. At the extremes, employers may adopt an exploitative approach which is essentially anti-union and based on reducing labour costs as much as possible. Alternatively they may recognise collective interests and negotiate agreements with unions which include provision of training and recognition of skills. In between these extremes an almost infinite variety of types is possible. A refusal or reluctance to recognise collective interests may be based on a paternalistic approach which regards management as being in a better position to promote the interests of employees, or an ideological opposition to trade unionism. Where the collective is recognised, employers approaches to bargaining may fit anywhere along a continuum between adversarialism and co-operation; and the content of the contracts which are negotiated may similarly range from minimalist to being comprehensive and generous in nature. In the New Zealand context, studies of management practice in the period following the ECA have followed the tradition of classificatory systems which suggested that three broad approaches were taken as industrial relations environments diversified (Batstone, 1988; Baglioni, 1990; Horstman, 1988). Boxall (1993) hypothesised the existence of three types of employment strategy in the early 1990s mainstream employers who had changed little in their employment practices; those who have used the ECA to drive down wages and conditions of work; and those pursuing a high-trust strategy. In addition, factor analysis of workplace data has been used to argue that a range of enterprise types can be distinguished (see Heylen, 1992, 1993; Armitage and Dunbar, 1993; Whatman et al., 1994). Neither of these analyses, however, have attracted significant debate, nor has there been systematic analysis of why employers in similar circumstances adopt different practices, and how these have changed over time.
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Rose Ryan
Research methodology
The study on which this paper is based was carried out from mid-1995 through 1996, using several methodological approaches. In the second half of 1995, a survey was sent to a sample of 1,150 workplaces in the Accommodation Cafes and Restaurants industrial sector (ANZSIC subdivision 57), selected at random off the Statistics New Zealand Business Directory1. A response rate of 60.7% was achieved, and Table 1 below provides details about the survey responses. Table 1: Responses to survey Number Employed fewer than 5 staff or had gone out of business 98 Returned incomplete or not completed 8 13 Declined to answer2 Gone no address 19 Useable responses 560 Total 698 Completed questionnaires were received from a wide range of workplaces across all sizes, locations and industry sub-groups. It is impossible to definitively establish whether the sample is fully representative of the industry as a whole, as Statistics New Zealand currently publishes its statistics according to the old NZSIC. However, estimates suggest that the sample is reasonably representative, although with a slight over-representation of hotels and pubs; and a slight underrepresentation of motels and cafes. The reason for this is likely to be the different response rates from workplaces of different sizes, so that those parts of the industry in which workplaces are medium- and large-sized are likely to be over-represented. In addition to the postal questionnaire, qualitative data was collected through follow-up interviews at 37 workplaces, across a range of industry sub-sectors, size groups and locations. Interviews were semi-structured, following a pre-set list of subject areas, but being wide-ranging in specific content. All interviews took place at the interviewee's workplace, and ranged in length from half an hour to an hour and a half, with most taking 45-50 minutes. All interviews were tape recorded. Lastly, an analysis of employment contracts pertaining in the industry was undertaken. Wherever possible, employment contracts were collected from workplaces where interviews took place; and these were supplemented with others obtained from a variety of sources.3 In all, 62 contracts, all current at January 1997, were analysed according to a pre-determined range of variables. Contracts ranged from those covering an individual employee at a specific workplace to standard contracts applying at a number of workplaces.
The Business Directory is the most comprehensive listing of businesses in New Zealand. It comprises information on all economically significant enterprises defined as those with more than $30,000 annual GST expenses or with more than two full-time equivalent employees. Information on employers is obtained through an Annual Business Directory Update Survey. In addition, the database is updated by receiving feedback from other economic and financial surveys (e.g. Retail Trade Survey); by a monthly birth survey of all compulsorily GST registered businesses (this is the prime source for adding new businesses to the frame) and by media and Building Permit information to capture significant new business start ups (e.g. new shopping malls).
2
1
This included respondents who objected to completing the questionnaire and those where the organisation has a policy of not doing so.
3
I am particularly grateful to Associate Professor Raymond Harbridge who generously allowed access to his database of contracts.
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Rose Ryan
Industrial relations in hotels and restaurants
The research addressed a number of issues relating to the nature and content of employment contracts operating at the workplace, the process for their negotiation, and employee representation in industrial relations processes. The overall picture was one which confirmed some but not all stereotypes of the industry. 56.2 per cent of the workplaces surveyed had written employment contracts, rising to over two-thirds where more than 15 employees were employed. In addition, collective contracts were evidenced in larger numbers than was expected. While a higher proportion of workplaces had individual rather than collective employment contracts (43.9 per cent as opposed to 32.3 per cent) a further 17.7 per cent had individual arrangements applying on top of collective ones. The content of contracts, however, and the process of wage determination for individual employees, can rarely be said to constitute a process of negotiation. Even by managers own accounts, employment contracts, irrespective of whether they are collective or individual, are determined by management, and in only 18.2 per cent of workplaces did managers describe their contracts as being negotiated, either by individuals or by an employee representative. This lack of negotiation in part reflects the low level of union density applying in the industry. Two-thirds of survey respondents had no union members in their workplace, and in only 3.6 per cent did the number of union members exceed 50 per cent. Other measures indicated a low level of union activity. Unions had attempted to recruit members in just over 10 per cent of workplaces in the previous year, and in a similarly low percentage the union had raised an issue with management on behalf of an employee. Few managers had any contact with the union, and a number said that while they had had dealings with them in the past, this had dropped off significantly in the post1991 period. While only a small proportion of employees belonged to an employee organisation, a larger number of employers belonged to an employer body. Only just over a quarter of respondents did not belong to any employer organisation, and a high proportion belonged either to the relevant industry body (e.g. the Hospitality Association, Motel Association of New Zealand, Chartered Clubs Association) or to an employer organisation (e.g. the New Zealand Employers Federation or a constituent Employer Association) or to both. Those that did not belong to any employer group were generally those employing fewer than 10 staff. The general picture painted above masks considerable variation in patterns of industrial relations in the industry. Four different management approaches were discerned, and may be described in terms of the view that managers had of their employees (in particular in respect of training and skill formation) and the construction they placed on the employment relationship, the approach they took to contract negotiations, and their attitude towards employee representatives. The four managerial variants, which should be seen as behavioural clusters rather than distinct and mutually exclusive types, are described below. The good employer Despite the popular image of employers in the industry as adopting a largely exploitative stance in relation to their employees, a number of organisations have adopted progressive industrial relations and human resource practices. These tend to be larger than average, and typically include workplaces that are part of a larger organisation (such as hotel and fast food chains, and some Licensing Trusts). Their larger size means that they often employ personnel or human resource professionals responsible for industrial relations matters. Workplaces of this type are characterised by a high level of commitment to employee training, a continuing recognition of collective interests including protection of union rights, and employment contracts which establish mutual rights and obligations between the parties. Levels of training in the industry have increased at an exponential rate over recent years, with numbers of employees attending courses overseen by the Hospitality Standards Institute (formerly the Hotel and Catering Industry Training Board) increasing by 267 per cent in the 1990s. A reflection of this was seen in the survey results, with between a third and a half of restaurants and fast food restaurants providing on-going training to more than half of their employees in the previous year. Hotels and fast food restaurants commonly have their own in-house training programs which provide employees with structured learning experiences and skill appraisal. In addition, employment contracts increasingly include training provisions which set out training guarantees, recognition of training undertaken at workplaces of a similar quality standard, paid 314
Rose Ryan time off for training, and employer reimbursement of tuition and examination fees. Pay rates are frequently based at least partially on skill, and extra payments or increases in wages for skill attainment are provided for. While workplaces of this type place high value on individual employees, they have not eschewed collective rights. Some employment contracts continue to include provisions for deduction of union fees, recognition of job delegates and paid time off for union meetings, and a larger number are negotiated with the unions. Managers at these workplaces can in no way be characterised as antiunion. They are happy to continue to work with unions where their employees are members. As one employer stated: I don't have a problem with the union. I don't care whether we have a union or not. If I had a problem with a dismissal and that person's been a union member, I've sought advice. Because if you involve the union at the right time, then the union will be helpful, because they want to see their work ... they want to succeed as well. It s a matter of trust. (Fast Food Restaurant manager) At the same time, moves towards alternative forms of employee representation are evident. Larger workplaces have commonly moved towards the establishment of various committees made up of employer and employee representatives for discussion and policy formation on varying issues including health and safety, training, negotiation of the employment contract, and disputes and grievances. Employee representatives are rarely elected, however, but are more commonly volunteers or selected by management. We use volunteers ... those that are interested, usually no coercion, and a lot of them. You'd be surprised at the people that want to be on people that don't normally volunteer for anything else, but are really interested in that area. You know, chefs, kitchen hands, telephonists people that you might not think would be interested because of the level of the job that they are doing. But we ask for volunteers and we say to them look this is for your benefit, it s not only for the benefit of management. (Hotel manager) There's never any problems about finding a representative. What we try and do is to make sure we've got a really good cross-section of people. So we've got some older people, some younger people, some full-time and part-time workers, and we put up the list. If we select, we select the people basically so that we've got a spread of people, like we've a manager in there, because they're on the time card as well they're not all on salary. (Fast Food Restaurant manager) The employment contracts applying at these workplaces are invariably collective, and comprehensive in the range of conditions of employment that they cover. In addition to wage and leave provisions, they generally include provision of meals and clothing, transport to and from work between 11pm and 7am, two rostered days off in seven, limits on-hours of work and payment of overtime outside these times, and occupational health and safety and training. Because these conditions are included in the contract, they not subject to managerial discretion. Pay and conditions are generally above average, reflecting what one manager described as a desire to be the employer of first choice . Where contracts set out employee obligations, these are often framed as requests, and the operational reasons for their inclusion specified. In addition, contracts frequently include a statement of intent which describes the employment relationship in terms of mutual obligation. One contract for example expresses this in the following way: Nothing within this agreement exempts any manager from their duty to treat those for whom they are responsible in a caring and equitable manner. Likewise, nothing in this agreement shall exempt workers from their responsibility to do their best to promote the industry and the enterprise for which they work. The parties agree that they will give each other the utmost cooperation to ensure that harmonious industrial relations are maintained. (Hotel contract) Paternalism 315
Rose Ryan Paternalistic employers form perhaps the numerical majority of those in the hospitality industry. In contrast to the professionalism and business-like nature of good employers , the construction of the employment relationship in workplaces with a paternalist style of management is intensely personal and direct, in part reflecting the fact that these workplaces are often small- to mediumsized. In interviews, managers frequently made reference to the workplace dynamic as being family-like , to socialising with their employees after work, and to providing them with assistance with personal problems which impacted at the workplace. An indication that employees shared at least some of these perspectives is seen in the fact that labour turnover at these workplaces is frequently low, with longer than average job tenure. The direct and personal nature of the employment relationship in these workplaces is reflected in the attitude of these employers and managers to employee representation. Most commonly, these managers would express a positive view of unions as protecting workers from other employers, but saw them as unnecessary in their own workplace. Two managers outlined this as follows: [If the union wanted a meeting with employees] ... we'd say fine, we can t really stop them. But I believe there's nothing here, in the contracts, that would contravene ... everybody's treated fairly. Pay-rates are probably a little above the award. (Hotel manager.) We have not seen them since the Employment Contracts Act started, not even to bring in any information. When the ECA was first proposed we said to the staff, we believe in unions and we think you should stay members of the union. It costs you a pittance, and you never know when you're going to need it. And of the 12 people we were employing then, one person chose to keep paying union fees. (Restaurant manager) The importance of personal relationships meant that these managers often felt a sense of failure when employees went outside the workplace for advice on employment-related matters. One hotel manager saw it as underhand that her employees had approached the union for advice on changing hours of work; while a motel manager expressed a sense of hurt that an employee had rung the Labour Inspectorate to ask about payment for public holidays. In both situations, the managers were unable to understand why their employees had not been able to come to them direct with their problem. This attitude was prevalent despite the fact that nearly three-quarters of workplaces were members of employer or industry organisations from whom they sought professional advice on employment-related matters. Few employers understood the gulf between their own resources and those of their employees. Even when they did, they saw themselves as being the best source of assistance for their employees: We have to admit we did want to position the contract in a way that benefited us without though taking away any rights from them, or making it harder for them ... To a certain degree we had to spoon feed our staff. There was very little understanding and very little ... what we could see as true support being given to them. If they wanted support, if they wanted the understanding to work through the Contracts Act, they actually had to go to the agencies involved to do that. But even being able to find out what agencies were involved, we had to spoon feed them that. Which we didn't have to do, but it was a case of going through that process. We found that giving them the responsibility of doing what the old union representatives had done before them was a daunting task, and many of them are still at a loss with that situation. (Motor Lodge manager) While employers at these workplaces were open to the possibility of employee negotiations over their employment contracts, most noted that in practice this had not eventuated. Contracts of employment are not comprehensive, and it is common for conditions of employment (such as uniform and meal allowances, late transport home, protections against working on rostered days off, and so on) included in a staff handbook , or paid informally. This allows a considerable degree of employer discretion in wages and conditions, and it was clear from interviews that employers made use of this. For example, managers talked about paying wage increases or providing training for those employees who they considered to be worth it and providing or withdrawing benefits according to their personal assessment of whether the employee deserved that benefit. Thus while paternalist employers believe that they have employees best interests at heart, and while their 316
Rose Ryan workplaces may be good places to work , their approach may not guarantee protections for employees. The legal minimalist The employers and managers who may be described as legal minimalists include those whose general approach to the employment relationship is based on reducing labour costs to the maximum extent possible within the framework of the law. Little value is placed on employees, work is seen as low-skilled, and the training that is provided is based simply on providing employees with the minimum amount of information which they need to perform their jobs. These managers have a very low level of trust of their employees, and frequently expressed sentiments which suggested that they saw employees as constantly trying to get away with as much as they could. To avoid this, employers maintained a strong sense of their managerial prerogative. They expressed this through demands for employee loyalty and commitment; total flexibility in hours of work (including being available to work seven days a week if required) and acquiescing to employer scheduling of all annual leave. They took little consideration of employees personal lives and in interviews several managers explicitly stated that employees were regarded as not being co-operative if they refused to be available for work at particular times, because of sporting or church commitments. Needless to say, the expectation of loyalty and commitment was one way. One employer for example, in explaining how he established rosters for casual staff, stated: We organise their hours as much as possible, because then you don t attract penalty rates when you get public holidays and things. Trying to avoid as much as possible giving Saturday as set hours or any days so you don t form permanent patterns. So we don t fall into the trap of accountability if you like. (Hotel manager) This emphasis on managerial prerogative is also seen in the specification of offences which may lead to use of the disciplinary procedure or result in instant dismissal. While it is common in hospitality sector contracts for contracts to specify that disciplinary procedures may be instituted for insubordination, dishonesty, or arriving at work under the influence of alcohol or drugs , contracts applying at workplaces where emphasis is placed on legal minimums include long lists of actions for which disciplinary action may be taken. These frequently emphasise the requirement of employees to obey employer instructions and in one contract even go so far as to attempt to prohibit employee discussion or criticism of management. The employment contracts in place in these workplaces are often individual, but standardised, with no employee input or negotiation over their content. That they are drawn up by lawyers is suggested by the often complex legal phrasing that they use (e.g. The employer hereby offers to the employee the position referred to in the schedule hereto, on the terms and conditions stipulated herein ). They provide little more in the way of conditions of work than that provided by statute, and wage rates are no higher than those needed to attract staff. About a quarter of contracts also include confidentiality and restraint of trade clauses. While some of these simply draw employee attention to their duty of fidelity under common law, others go into substantial detail about employee obligations ... not to reveal any of the trade secrets, secret or confidential operations, processes or dealings, or any other information ... business, finances, customer lists, transactions, or affairs of the employer (Motel contract). Given that the survey data found that few employers provided their employees with information about operational plans or the financial position of the workplace, these clauses are clearly excessive in their nature. A smaller number include an employee loyalty clause which, reminiscent of employment contracts from the turn of the century, requires employees to pledge loyal, honest and trustworthy service to the employer at all times in return for being treated with respect and dignity. A small number of contracts also contain a prohibition on employees being employed in other jobs. The exploitative employer Exploitative employers are generally small in number, and differ from legal minimalists in that their attempts to reduce labour costs extend to conditions of employment that are contrary to employment law. To the extent that many employers do not clearly understand their obligations as employers, some of these unlawful actions may be the result of ignorance rather than deliberate action. Interviews conducted as part of the research, for example, found managers who believed 317
Rose Ryan that there was still an award in place; that they were required by law to abide by the Hospitality Association standard contract, that they could negotiate away statutory holidays by negotiation, and that they could reduce wages to the level of the minimum wages without employee consent. Of even more concern is the fact that some of these beliefs were based on advice which they had received from their lawyers and accountants. While ignorance may explain at least some incidents of unlawful employment practices, there is no doubt that a small minority of employers see the law as standing in the way of operational efficiency and the exercise of their managerial prerogative. The highly competitive environment of the hospitality industry, and the emphasis on responsiveness to customer requirements is maintained in some workplaces at the expense of fairness in employment matters. One bar manager explicitly stated that he would instantly dismiss an employee that customers did not like, and felt that the procedural fairness requirements developed by the Courts interfered with the running of his business. Similarly, the employment contract applying in one hotel paying its cleaners by the room states that no payment will be made where the standard of room cleaning gives rise to a justifiable customer complaint. Nevertheless, it must be said that these employers form a small minority within the industry.
Summary and conclusions
This paper has described some of the range of industrial relations practices applying in the hospitality sector in New Zealand. It suggests that the stereotype of the industry as being entirely exploitative in its approach to industrial relations is too simplistic and that management approaches range from the very exploitative through to good employers who continue to bargain with unions, value their employees and apply contracts which are generally fair. It is clear, however, that there is a significant gulf in bargaining power between employers and employees in the industry. Employers have access to considerably more employment-related advice and resource than do employees, and develop contracts on the basis of advice from outside experts who not surprisingly have their client s best interest at heart. While good employers exist within the industry, the power to construct industrial relations on mutual, rather than exploitative terms, is very clearly in the hands of managers and employers, rather than workers and unions. Unsurprisingly, this is most likely to occur where the power gulf between the power of employers and employees is bridged in some way. Collective employment contracts, for example, are generally more comprehensive and beneficial to employees than individual contracts, and those contracts that have been negotiated by the union are generally more comprehensive and beneficial to employees than those that have not. The research does, however, raise a number of other questions to be followed up in further analysis. In particular, questions are raised about possible explanations for differences between workplaces. While some association with size and industry sub-sector is found, exceptions suggest that other factors, including employer assumptions and beliefs, may prove to be important. Secondly, the extent of each managerial variant within the hospitality industry will be examined. While paternalist and legal minimalist employers may form a numerical majority of employers, their small workplace size may mean that practices may impact on a smaller number of employees in comparison to the larger than average good employers. Lastly, the research raises some interesting questions as to how employer practices in hospitality compare with those in other industries in New Zealand. It is to be hoped that further research will take place in the future, allowing us to make some assessment as to whether the service sector is managed in the same way, or differently, from manufacturing and processing industries; or whether factors such as size are the key variables in determining managerial practices.
References
Armitage, C. and Dunbar, R. (1993) Labour market adjustment under the Employment Contracts Act. New Zealand Journal of Industrial Relations 18(1): 94-112. Baglioni, G. (1990) Industrial relations In Europe in the 1980s. In G. Baglioni and C. Crouch (Eds), European Industrial Relations: The Challenge of Flexibility. London: Sage Publications Ltd. 318
Rose Ryan Batstone, E. (1988) The Reform of Workplace Industrial Relations: Theory, Myth and Evidence. Oxford: Clarendon Press. Boxall, P. (1993) Management strategy and the Employment Contracts Act. In R. Harbridge (Ed.), Employment Contracts New Zealand Experiences. Wellington: VUW Press. Boxall, P. (1995) HRM: a conceptual framework. In P. Boxall (Ed.), The Challenge of HRM: Directions and Debates in New Zealand. Auckland: Longman Paul. Gosche, M. (1992) The impact of the Employment Contracts Act 1991. Paper presented to a seminar The Employment Contracts Act: One Year On. Industrial Relations Centre, Victoria University of Wellington, 15 May 1992. Guest, D. (1990) Human resource management and the American dream. Journal of Management Studies 27(4): 378-397. Harbridge, R. and Street, M (1995) Labour market adjustment and women in the service industry: a survey. New Zealand Journal of Industrial Relations 20(1): 23-34. Harbridge, R. and Crawford, A. (1996) The Employment Contracts Act and collective bargaining patterns: a review of the 1995/96 year. In R. Harbridge, A. Crawford and P. Kiely (Eds), Employment Contracts: Bargaining Trends and Employment Law Update. Wellington: Industrial Relations Centre, Victoria University of Wellington. Henning, J. (1995) The Employment Contracts Act and work stoppages. New Zealand Journal of Industrial Relations 20(1): 77-92. Heylen Research Centre (1992) A Survey of Labour Market Adjustment under the Employment Contracts Act 1991. Wellington: Industrial Relations Service, Department of Labour. Heylen Research Centre (1993) A Survey of Labour Market Adjustment under the Employment Contracts Act 1991 (November 1993). Wellington: Industrial Relations Service, Department of Labour. Horstman, B. (1988) Labour flexibility strategies and management style. Journal of Industrial Relations 30(3): 412-431. Industrial Relations Service (1996) Contract Vol 18 August 1996. Wellington: Department of Labour. Marchington, M. and Parker, P. (1990) Changing Patterns of Employee Relations. Brighton: Harvester Wheatsheaf. Purcell, J. (1987) Mapping management styles in employee relations. Journal of Management Studies 24(5): 533-548 Purcell, J. and Ahlstrand, B (1993) Strategy and Style in Employee Relations. Oxford: Oxford University Press. Purcell, J. and Sisson, K. (1983) Strategies and practice in the management of industrial relations . In G.S. Bain (Ed.), Industrial Relations In Britain. Oxford: Basil Blackwell Ltd. Statistics New Zealand (1993) Employment Contracts Survey. Wellington: Statistics New Zealand. Whatman, R., Armitage, C. and Dunbar, R. (1994) Labour market adjustment under the Employment Contracts Act. New Zealand Journal of Industrial Relations 19(1): 53-74. Yeabsley, J. and Savage, J. (1996) What do we know about the economic impacts of the Employment Contracts Act? New Zealand Institute of Economic Research, Address to the Moving Forward Conference, Auckland, May 15 1996.
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Other authors see employee relations as dealing only with non-unionized workers, whereas labor relations is seen as dealing with unionized workers.
Rose Ryan
Market Rules: Industrial Relations in Hotels and Restaurants
Rose Ryan
Abstract: In recent years, various commentators have pointed out the need to examine the nature of industrial relations in the service sector. This paper reports evidence from a multimethod study of workplaces in the Accommodation, Cafes and Restaurants industrial sector, which in New Zealand makes an increasingly significant contribution to employment and economic growth. Despite the stereotype of the industry as highly casualised and low-skilled, the research suggests that a variety of management approaches to industrial relations can be discerned in respect of the nature of the employment relationship, the approach to collectivism and the structure and content of employment contracts.
Introduction
The environment surrounding the Employment Contracts Act (ECA) in New Zealand has been controversial since its passage in 1991. Much has been claimed for the Act, including increased levels of employment and productivity, and a reduction in industrial action. While some of these claims are difficult to prove or disprove (see for example, Henning, 1995; Yeabsley and Savage, 1996), an indisputable feature of change during the 1990s has been a decentralisation of industrial relations to the level of the workplace. The most common type of collective employment contracts are those established at an enterprise level (Industrial Relations Service, 1996; Harbridge and Crawford, 1996) and it has been estimated that just under a third of the workforce are employed under individual employment contracts (Statistics New Zealand, 1993). Despite this change, employer approaches to industrial relations in the past five years are still a matter for debate. While some have claimed that the Act has allowed more positive relationships to develop between employers and employees, others have argued that the Act has facilitated a more aggressive approach to industrial relations based on exercise of unconstrained managerial prerogative. Attempts have been made to estimate the spread of various practices (see for example Boxall, 1993, 1995; Heylen Research Centre, 1992, 1993), but in general little is known about the ways in which individual employers have approached the transition to enterprise-based bargaining. The service sector in general, and the hospitality industry in particular, is generally used to illustrate the ways in which employers have made use of new-found freedoms to take advantage of workers in a disadvantaged labour market position (Gosche, 1992; Harbridge and Street, 1995). While these studies are important in providing an understanding of the impact of the Act from an employee perspective, at the same time, they paint only a partial picture of the dynamics of workplace industrial relations. This paper aims to reduce this gap, reporting evidence from a multimethod study of labour, employment and work in the hospitality sector in New Zealand. It suggests that the image of the industry as unitarist and exploitative must be rejected in favour of a more complex picture of patterns of industrial relations.
Management practice in industrial relations
Changes in the balance of bargaining advantage in the 1970s and 1980s saw employer industrial relations practices being more commonly included on the industrial relations research agenda. While space considerations do not permit a review of these in this paper, several typologies of management practice were developed (see for example, Purcell, 1987; Guest, 1990; Marchington and Parker, 1990; Purcell and Ahlstrand, 1993) which suggested that approaches to industrial relations in different workplaces varied according to workplace size, ownership, product market conditions, and technological and operational considerations. While many commentators argued that the 1980s saw a shift from collectivism to individualism, and a corresponding decline in trade unions and collective bargaining, Purcell and Sisson (1983) argued that some employers had adopted policies which promoted the interests of employees as individuals, while still working with trade unions. Conversely, continuing collectivism did not guarantee protection of worker interests. 311
Rose Ryan This argument has formed the basis for several further typologies of management practice which make a distinction between management approaches to employees as individuals (specifically the extent to which employees are treated as a valued resource or as a commodity) and as a collective (particularly whether a co-operative or adversarial approach is adopted). This may be represented diagrammatically as seen in Figure 1.
Employee as resource
Employee development
Sophisticated human relations
Consultative
INDIVIDUALIS M
Paternalis m
Traditional paternalism Bargained constitutional Traditional
Employee as commodity
Labour control and cost minimisation
None (Unitary)
Adversarial COLLECTIVISM
Figure 1: Management approaches to industrial relations (Source: adapted from Purcell, 1987; Purcell and Ahlstrand, 1993; Storey and Sisson, 1994.) The possibility that employers may adopt a variety of approaches to employees as individuals and as collectives gives rise to the likelihood of a wide range of managerial practices. At the extremes, employers may adopt an exploitative approach which is essentially anti-union and based on reducing labour costs as much as possible. Alternatively they may recognise collective interests and negotiate agreements with unions which include provision of training and recognition of skills. In between these extremes an almost infinite variety of types is possible. A refusal or reluctance to recognise collective interests may be based on a paternalistic approach which regards management as being in a better position to promote the interests of employees, or an ideological opposition to trade unionism. Where the collective is recognised, employers approaches to bargaining may fit anywhere along a continuum between adversarialism and co-operation; and the content of the contracts which are negotiated may similarly range from minimalist to being comprehensive and generous in nature. In the New Zealand context, studies of management practice in the period following the ECA have followed the tradition of classificatory systems which suggested that three broad approaches were taken as industrial relations environments diversified (Batstone, 1988; Baglioni, 1990; Horstman, 1988). Boxall (1993) hypothesised the existence of three types of employment strategy in the early 1990s mainstream employers who had changed little in their employment practices; those who have used the ECA to drive down wages and conditions of work; and those pursuing a high-trust strategy. In addition, factor analysis of workplace data has been used to argue that a range of enterprise types can be distinguished (see Heylen, 1992, 1993; Armitage and Dunbar, 1993; Whatman et al., 1994). Neither of these analyses, however, have attracted significant debate, nor has there been systematic analysis of why employers in similar circumstances adopt different practices, and how these have changed over time.
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Research methodology
The study on which this paper is based was carried out from mid-1995 through 1996, using several methodological approaches. In the second half of 1995, a survey was sent to a sample of 1,150 workplaces in the Accommodation Cafes and Restaurants industrial sector (ANZSIC subdivision 57), selected at random off the Statistics New Zealand Business Directory1. A response rate of 60.7% was achieved, and Table 1 below provides details about the survey responses. Table 1: Responses to survey Number Employed fewer than 5 staff or had gone out of business 98 Returned incomplete or not completed 8 13 Declined to answer2 Gone no address 19 Useable responses 560 Total 698 Completed questionnaires were received from a wide range of workplaces across all sizes, locations and industry sub-groups. It is impossible to definitively establish whether the sample is fully representative of the industry as a whole, as Statistics New Zealand currently publishes its statistics according to the old NZSIC. However, estimates suggest that the sample is reasonably representative, although with a slight over-representation of hotels and pubs; and a slight underrepresentation of motels and cafes. The reason for this is likely to be the different response rates from workplaces of different sizes, so that those parts of the industry in which workplaces are medium- and large-sized are likely to be over-represented. In addition to the postal questionnaire, qualitative data was collected through follow-up interviews at 37 workplaces, across a range of industry sub-sectors, size groups and locations. Interviews were semi-structured, following a pre-set list of subject areas, but being wide-ranging in specific content. All interviews took place at the interviewee's workplace, and ranged in length from half an hour to an hour and a half, with most taking 45-50 minutes. All interviews were tape recorded. Lastly, an analysis of employment contracts pertaining in the industry was undertaken. Wherever possible, employment contracts were collected from workplaces where interviews took place; and these were supplemented with others obtained from a variety of sources.3 In all, 62 contracts, all current at January 1997, were analysed according to a pre-determined range of variables. Contracts ranged from those covering an individual employee at a specific workplace to standard contracts applying at a number of workplaces.
The Business Directory is the most comprehensive listing of businesses in New Zealand. It comprises information on all economically significant enterprises defined as those with more than $30,000 annual GST expenses or with more than two full-time equivalent employees. Information on employers is obtained through an Annual Business Directory Update Survey. In addition, the database is updated by receiving feedback from other economic and financial surveys (e.g. Retail Trade Survey); by a monthly birth survey of all compulsorily GST registered businesses (this is the prime source for adding new businesses to the frame) and by media and Building Permit information to capture significant new business start ups (e.g. new shopping malls).
2
1
This included respondents who objected to completing the questionnaire and those where the organisation has a policy of not doing so.
3
I am particularly grateful to Associate Professor Raymond Harbridge who generously allowed access to his database of contracts.
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Industrial relations in hotels and restaurants
The research addressed a number of issues relating to the nature and content of employment contracts operating at the workplace, the process for their negotiation, and employee representation in industrial relations processes. The overall picture was one which confirmed some but not all stereotypes of the industry. 56.2 per cent of the workplaces surveyed had written employment contracts, rising to over two-thirds where more than 15 employees were employed. In addition, collective contracts were evidenced in larger numbers than was expected. While a higher proportion of workplaces had individual rather than collective employment contracts (43.9 per cent as opposed to 32.3 per cent) a further 17.7 per cent had individual arrangements applying on top of collective ones. The content of contracts, however, and the process of wage determination for individual employees, can rarely be said to constitute a process of negotiation. Even by managers own accounts, employment contracts, irrespective of whether they are collective or individual, are determined by management, and in only 18.2 per cent of workplaces did managers describe their contracts as being negotiated, either by individuals or by an employee representative. This lack of negotiation in part reflects the low level of union density applying in the industry. Two-thirds of survey respondents had no union members in their workplace, and in only 3.6 per cent did the number of union members exceed 50 per cent. Other measures indicated a low level of union activity. Unions had attempted to recruit members in just over 10 per cent of workplaces in the previous year, and in a similarly low percentage the union had raised an issue with management on behalf of an employee. Few managers had any contact with the union, and a number said that while they had had dealings with them in the past, this had dropped off significantly in the post1991 period. While only a small proportion of employees belonged to an employee organisation, a larger number of employers belonged to an employer body. Only just over a quarter of respondents did not belong to any employer organisation, and a high proportion belonged either to the relevant industry body (e.g. the Hospitality Association, Motel Association of New Zealand, Chartered Clubs Association) or to an employer organisation (e.g. the New Zealand Employers Federation or a constituent Employer Association) or to both. Those that did not belong to any employer group were generally those employing fewer than 10 staff. The general picture painted above masks considerable variation in patterns of industrial relations in the industry. Four different management approaches were discerned, and may be described in terms of the view that managers had of their employees (in particular in respect of training and skill formation) and the construction they placed on the employment relationship, the approach they took to contract negotiations, and their attitude towards employee representatives. The four managerial variants, which should be seen as behavioural clusters rather than distinct and mutually exclusive types, are described below. The good employer Despite the popular image of employers in the industry as adopting a largely exploitative stance in relation to their employees, a number of organisations have adopted progressive industrial relations and human resource practices. These tend to be larger than average, and typically include workplaces that are part of a larger organisation (such as hotel and fast food chains, and some Licensing Trusts). Their larger size means that they often employ personnel or human resource professionals responsible for industrial relations matters. Workplaces of this type are characterised by a high level of commitment to employee training, a continuing recognition of collective interests including protection of union rights, and employment contracts which establish mutual rights and obligations between the parties. Levels of training in the industry have increased at an exponential rate over recent years, with numbers of employees attending courses overseen by the Hospitality Standards Institute (formerly the Hotel and Catering Industry Training Board) increasing by 267 per cent in the 1990s. A reflection of this was seen in the survey results, with between a third and a half of restaurants and fast food restaurants providing on-going training to more than half of their employees in the previous year. Hotels and fast food restaurants commonly have their own in-house training programs which provide employees with structured learning experiences and skill appraisal. In addition, employment contracts increasingly include training provisions which set out training guarantees, recognition of training undertaken at workplaces of a similar quality standard, paid 314
Rose Ryan time off for training, and employer reimbursement of tuition and examination fees. Pay rates are frequently based at least partially on skill, and extra payments or increases in wages for skill attainment are provided for. While workplaces of this type place high value on individual employees, they have not eschewed collective rights. Some employment contracts continue to include provisions for deduction of union fees, recognition of job delegates and paid time off for union meetings, and a larger number are negotiated with the unions. Managers at these workplaces can in no way be characterised as antiunion. They are happy to continue to work with unions where their employees are members. As one employer stated: I don't have a problem with the union. I don't care whether we have a union or not. If I had a problem with a dismissal and that person's been a union member, I've sought advice. Because if you involve the union at the right time, then the union will be helpful, because they want to see their work ... they want to succeed as well. It s a matter of trust. (Fast Food Restaurant manager) At the same time, moves towards alternative forms of employee representation are evident. Larger workplaces have commonly moved towards the establishment of various committees made up of employer and employee representatives for discussion and policy formation on varying issues including health and safety, training, negotiation of the employment contract, and disputes and grievances. Employee representatives are rarely elected, however, but are more commonly volunteers or selected by management. We use volunteers ... those that are interested, usually no coercion, and a lot of them. You'd be surprised at the people that want to be on people that don't normally volunteer for anything else, but are really interested in that area. You know, chefs, kitchen hands, telephonists people that you might not think would be interested because of the level of the job that they are doing. But we ask for volunteers and we say to them look this is for your benefit, it s not only for the benefit of management. (Hotel manager) There's never any problems about finding a representative. What we try and do is to make sure we've got a really good cross-section of people. So we've got some older people, some younger people, some full-time and part-time workers, and we put up the list. If we select, we select the people basically so that we've got a spread of people, like we've a manager in there, because they're on the time card as well they're not all on salary. (Fast Food Restaurant manager) The employment contracts applying at these workplaces are invariably collective, and comprehensive in the range of conditions of employment that they cover. In addition to wage and leave provisions, they generally include provision of meals and clothing, transport to and from work between 11pm and 7am, two rostered days off in seven, limits on-hours of work and payment of overtime outside these times, and occupational health and safety and training. Because these conditions are included in the contract, they not subject to managerial discretion. Pay and conditions are generally above average, reflecting what one manager described as a desire to be the employer of first choice . Where contracts set out employee obligations, these are often framed as requests, and the operational reasons for their inclusion specified. In addition, contracts frequently include a statement of intent which describes the employment relationship in terms of mutual obligation. One contract for example expresses this in the following way: Nothing within this agreement exempts any manager from their duty to treat those for whom they are responsible in a caring and equitable manner. Likewise, nothing in this agreement shall exempt workers from their responsibility to do their best to promote the industry and the enterprise for which they work. The parties agree that they will give each other the utmost cooperation to ensure that harmonious industrial relations are maintained. (Hotel contract) Paternalism 315
Rose Ryan Paternalistic employers form perhaps the numerical majority of those in the hospitality industry. In contrast to the professionalism and business-like nature of good employers , the construction of the employment relationship in workplaces with a paternalist style of management is intensely personal and direct, in part reflecting the fact that these workplaces are often small- to mediumsized. In interviews, managers frequently made reference to the workplace dynamic as being family-like , to socialising with their employees after work, and to providing them with assistance with personal problems which impacted at the workplace. An indication that employees shared at least some of these perspectives is seen in the fact that labour turnover at these workplaces is frequently low, with longer than average job tenure. The direct and personal nature of the employment relationship in these workplaces is reflected in the attitude of these employers and managers to employee representation. Most commonly, these managers would express a positive view of unions as protecting workers from other employers, but saw them as unnecessary in their own workplace. Two managers outlined this as follows: [If the union wanted a meeting with employees] ... we'd say fine, we can t really stop them. But I believe there's nothing here, in the contracts, that would contravene ... everybody's treated fairly. Pay-rates are probably a little above the award. (Hotel manager.) We have not seen them since the Employment Contracts Act started, not even to bring in any information. When the ECA was first proposed we said to the staff, we believe in unions and we think you should stay members of the union. It costs you a pittance, and you never know when you're going to need it. And of the 12 people we were employing then, one person chose to keep paying union fees. (Restaurant manager) The importance of personal relationships meant that these managers often felt a sense of failure when employees went outside the workplace for advice on employment-related matters. One hotel manager saw it as underhand that her employees had approached the union for advice on changing hours of work; while a motel manager expressed a sense of hurt that an employee had rung the Labour Inspectorate to ask about payment for public holidays. In both situations, the managers were unable to understand why their employees had not been able to come to them direct with their problem. This attitude was prevalent despite the fact that nearly three-quarters of workplaces were members of employer or industry organisations from whom they sought professional advice on employment-related matters. Few employers understood the gulf between their own resources and those of their employees. Even when they did, they saw themselves as being the best source of assistance for their employees: We have to admit we did want to position the contract in a way that benefited us without though taking away any rights from them, or making it harder for them ... To a certain degree we had to spoon feed our staff. There was very little understanding and very little ... what we could see as true support being given to them. If they wanted support, if they wanted the understanding to work through the Contracts Act, they actually had to go to the agencies involved to do that. But even being able to find out what agencies were involved, we had to spoon feed them that. Which we didn't have to do, but it was a case of going through that process. We found that giving them the responsibility of doing what the old union representatives had done before them was a daunting task, and many of them are still at a loss with that situation. (Motor Lodge manager) While employers at these workplaces were open to the possibility of employee negotiations over their employment contracts, most noted that in practice this had not eventuated. Contracts of employment are not comprehensive, and it is common for conditions of employment (such as uniform and meal allowances, late transport home, protections against working on rostered days off, and so on) included in a staff handbook , or paid informally. This allows a considerable degree of employer discretion in wages and conditions, and it was clear from interviews that employers made use of this. For example, managers talked about paying wage increases or providing training for those employees who they considered to be worth it and providing or withdrawing benefits according to their personal assessment of whether the employee deserved that benefit. Thus while paternalist employers believe that they have employees best interests at heart, and while their 316
Rose Ryan workplaces may be good places to work , their approach may not guarantee protections for employees. The legal minimalist The employers and managers who may be described as legal minimalists include those whose general approach to the employment relationship is based on reducing labour costs to the maximum extent possible within the framework of the law. Little value is placed on employees, work is seen as low-skilled, and the training that is provided is based simply on providing employees with the minimum amount of information which they need to perform their jobs. These managers have a very low level of trust of their employees, and frequently expressed sentiments which suggested that they saw employees as constantly trying to get away with as much as they could. To avoid this, employers maintained a strong sense of their managerial prerogative. They expressed this through demands for employee loyalty and commitment; total flexibility in hours of work (including being available to work seven days a week if required) and acquiescing to employer scheduling of all annual leave. They took little consideration of employees personal lives and in interviews several managers explicitly stated that employees were regarded as not being co-operative if they refused to be available for work at particular times, because of sporting or church commitments. Needless to say, the expectation of loyalty and commitment was one way. One employer for example, in explaining how he established rosters for casual staff, stated: We organise their hours as much as possible, because then you don t attract penalty rates when you get public holidays and things. Trying to avoid as much as possible giving Saturday as set hours or any days so you don t form permanent patterns. So we don t fall into the trap of accountability if you like. (Hotel manager) This emphasis on managerial prerogative is also seen in the specification of offences which may lead to use of the disciplinary procedure or result in instant dismissal. While it is common in hospitality sector contracts for contracts to specify that disciplinary procedures may be instituted for insubordination, dishonesty, or arriving at work under the influence of alcohol or drugs , contracts applying at workplaces where emphasis is placed on legal minimums include long lists of actions for which disciplinary action may be taken. These frequently emphasise the requirement of employees to obey employer instructions and in one contract even go so far as to attempt to prohibit employee discussion or criticism of management. The employment contracts in place in these workplaces are often individual, but standardised, with no employee input or negotiation over their content. That they are drawn up by lawyers is suggested by the often complex legal phrasing that they use (e.g. The employer hereby offers to the employee the position referred to in the schedule hereto, on the terms and conditions stipulated herein ). They provide little more in the way of conditions of work than that provided by statute, and wage rates are no higher than those needed to attract staff. About a quarter of contracts also include confidentiality and restraint of trade clauses. While some of these simply draw employee attention to their duty of fidelity under common law, others go into substantial detail about employee obligations ... not to reveal any of the trade secrets, secret or confidential operations, processes or dealings, or any other information ... business, finances, customer lists, transactions, or affairs of the employer (Motel contract). Given that the survey data found that few employers provided their employees with information about operational plans or the financial position of the workplace, these clauses are clearly excessive in their nature. A smaller number include an employee loyalty clause which, reminiscent of employment contracts from the turn of the century, requires employees to pledge loyal, honest and trustworthy service to the employer at all times in return for being treated with respect and dignity. A small number of contracts also contain a prohibition on employees being employed in other jobs. The exploitative employer Exploitative employers are generally small in number, and differ from legal minimalists in that their attempts to reduce labour costs extend to conditions of employment that are contrary to employment law. To the extent that many employers do not clearly understand their obligations as employers, some of these unlawful actions may be the result of ignorance rather than deliberate action. Interviews conducted as part of the research, for example, found managers who believed 317
Rose Ryan that there was still an award in place; that they were required by law to abide by the Hospitality Association standard contract, that they could negotiate away statutory holidays by negotiation, and that they could reduce wages to the level of the minimum wages without employee consent. Of even more concern is the fact that some of these beliefs were based on advice which they had received from their lawyers and accountants. While ignorance may explain at least some incidents of unlawful employment practices, there is no doubt that a small minority of employers see the law as standing in the way of operational efficiency and the exercise of their managerial prerogative. The highly competitive environment of the hospitality industry, and the emphasis on responsiveness to customer requirements is maintained in some workplaces at the expense of fairness in employment matters. One bar manager explicitly stated that he would instantly dismiss an employee that customers did not like, and felt that the procedural fairness requirements developed by the Courts interfered with the running of his business. Similarly, the employment contract applying in one hotel paying its cleaners by the room states that no payment will be made where the standard of room cleaning gives rise to a justifiable customer complaint. Nevertheless, it must be said that these employers form a small minority within the industry.
Summary and conclusions
This paper has described some of the range of industrial relations practices applying in the hospitality sector in New Zealand. It suggests that the stereotype of the industry as being entirely exploitative in its approach to industrial relations is too simplistic and that management approaches range from the very exploitative through to good employers who continue to bargain with unions, value their employees and apply contracts which are generally fair. It is clear, however, that there is a significant gulf in bargaining power between employers and employees in the industry. Employers have access to considerably more employment-related advice and resource than do employees, and develop contracts on the basis of advice from outside experts who not surprisingly have their client s best interest at heart. While good employers exist within the industry, the power to construct industrial relations on mutual, rather than exploitative terms, is very clearly in the hands of managers and employers, rather than workers and unions. Unsurprisingly, this is most likely to occur where the power gulf between the power of employers and employees is bridged in some way. Collective employment contracts, for example, are generally more comprehensive and beneficial to employees than individual contracts, and those contracts that have been negotiated by the union are generally more comprehensive and beneficial to employees than those that have not. The research does, however, raise a number of other questions to be followed up in further analysis. In particular, questions are raised about possible explanations for differences between workplaces. While some association with size and industry sub-sector is found, exceptions suggest that other factors, including employer assumptions and beliefs, may prove to be important. Secondly, the extent of each managerial variant within the hospitality industry will be examined. While paternalist and legal minimalist employers may form a numerical majority of employers, their small workplace size may mean that practices may impact on a smaller number of employees in comparison to the larger than average good employers. Lastly, the research raises some interesting questions as to how employer practices in hospitality compare with those in other industries in New Zealand. It is to be hoped that further research will take place in the future, allowing us to make some assessment as to whether the service sector is managed in the same way, or differently, from manufacturing and processing industries; or whether factors such as size are the key variables in determining managerial practices.
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