This book is the outcome of many years' research and writing on the management of labour. Its origins go back to a doctoral dissertation at the London School of Economics on the role of employers' associations in the development of the British system of industrial relations. Subsequently over the years I sustained my interest in the central role of management in industrial relations and carried out further research on wider aspects of labour management in various industries and individual companies. The book provides a synthesis of my work and that of others in the area. I hope also that it makes new contributions in terms of concepts, knowledge, and interpretations.

Inevitably over the years I have accumulated a considerable debt of gratitude to various academic colleagues. B. C. Roberts and H. A. Clegg encouraged my original interest in the role of employers and my belief that they are the prime movers in industrial relations. Colleagues at the University of Kent have commented on various drafts of the manuscript and I would like in particular to thank J. Lovell, S. Glynn, J. Oxborrow, G. Crompton, and G. Rubin. Colleagues at the London School of Economics have also commented over the years and here I am particularly grateful to L. Hannah, T. Gourvish, S. Keeble, D. Baines, E. Hunt, R. Fitzgerald, and J. Tomlinson. Many others have helped with suggestions for improvement on specific themes and chapters. I have received assistance from economic and business historians who have corrected many of my historical errors and misunderstandings – G. Jones, J. Zeitlin, S. Tolliday, J. Melling, A. Reid, N. Whiteside, P. Thane, A. Mclvor, R. Coopey, L. Holden, and A. McKinlay.

This book has set the history of labour management in Britain in a broad economic and business context. It has argued that the legacy from the nineteenth century had a profound effect on the management of labour in the twentieth century. The first half of the twentieth century witnessed considerable changes in the structure of British industry which in part modified that traditional pattern of labour relations. Markets, which had at first been open and expanding, became subject in the interwar years to growing restrictive and protectionist tendencies. Newer industries based on mass-production technologies became firmly established. Corporate structures also changed and there was a growth of large firms and managerial hierarchies. However, there were also significant continuities from the nineteenth century. Britain remained heavily committed to the older staple industries and markets often remained highly fragmented and differentiated. With the exception of the two world wars, the labour market continued to be characterised by elastic labour supply. The large firms which emerged at the turn of the century and in the interwar years often remained loose federations of constituent companies with weak managerial hierarchies. In this environment, it was argued, many British employers retained traditional forms of work relations which were labour intensive, which afforded skilled workers considerable autonomy, and which constrained productivity growth. In terms of employment and industrial relations firms, for the most part, chose strategies of externalisation and failed to develop strong internal structures of labour management. Only a few exceptional firms, usually characterised by different market, structural, and managerial configurations, pursued different labour strategies and developed stronger internal structures of labour management.

Industrial relations are considered in this chapter before employment relations because of the importance which they assumed in British labour management in the period after the Second World War. It is true that in the early post-war years there was considerable complacency about industrial relations arrangements. However, industrial relations slowly emerged as a major problem for British management and assumed serious proportions for employers from the 1960s onwards. This chapter will analyse the nature of that problem, the employers' response, and the changes which occurred in the institutions of industrial relations.

The industrial relations pattern which had been established in the late nineteenth and early twentieth centuries was based on employer recognition of trade unions and collective bargaining with them through the agency of employers' associations external to the firm. In this way national agreements were established for most British industries laying down procedures and setting basic wages and conditions. By 1945 there were about 500 separate national institutions in which employers' organisations negotiated with trade unions. Internally, within the firm, in many industries, there had long existed rudimentary shopfloor bargaining with work groups and their representatives, but the strength of these varied with economic circumstances and arrangements were seldom formalised. During the upswing from depression and the war years, trade union membership grew considerably, reaching a peak in 1948 of 9.4 million or 45 per cent of the workforce. This was accompanied by an increase in union organisation and bargaining activity at the workplace. The wartime introduction of joint production committees and the more general need to consult workers strengthened workplace bargaining. Simultaneously the war extended and consolidated the national or external system of collective bargaining. Between 1939 and 1946, as many as 56 joint industrial councils or similar bodies were established or reestablished.

In the late nineteenth century an embryonic system of industrial relations had developed in Britain based primarily on employer recognition of trade unions through employers' associations, which negotiated and administered agreements covering procedures and wages and conditions. The procedural arrangements for handling disputes and negotiating agreements had become national in scope, while agreements on wages and conditions were less well developed and primarily covered only a district or region. This system of multi-employer bargaining was another aspect of the externalisation of labour management by British employers. The system suited employers in that it allowed them to maximise their collective strength through their associations, to counter the pressure for job control from skilled workers, and to reduce some of the uncertainty surrounding the fixing of wages and conditions. It also economised on the costs of investing in strong internal structures and hierarchies. It was argued in Chapter 2 that the main initiative for these arrangements came from the employers. However, the trade unions also obtained some real benefits - in particular formal recognition and a growing standardisation of pay and conditions. Union members also gained some benefits, but they often felt constrained by the system as the events of the years before the First World War showed. This chapter argues that in the first half of the twentieth century employers maintained and extended this externalised system of industrial relations, though towards the end of the period it was beginning to exhibit contradictions and weaknesses. For the most part, British employers failed to develop domestic arrangements internally within their firms.

A central argument of this book is that market and firm structures and the organisation of production had a major impact on the management of labour. Market conditions provided either an incentive or a disincentive to particular labour strategies; corporate structures and managerial hierarchies either facilitated or obstructed the implementation of particular policies. The organisation of production, in part shaped by market and firm structures, but also chosen by employers, in turn promoted or constrained labour policies. In this chapter the nineteenth-century background of market conditions, corporate structure, and the organisation of production is examined. Within this context, the chapter then examines managerial decisions in the areas of work relations, employment relations, and industrial relations and shows how, for the most part, British employers pursued strategies of externalisation.

Markets and firms

During the course of the nineteenth century, markets grew in geographical scope, largely as a result of improvements in transportation and cost reductions. At the end of the century, some markets remained predominantly local in nature, for example, in building, in consumer durables such as clothing and furniture making, and in non-durables such as brewing and baking. Other markets were already national in scope, especially those in packaged consumer goods such as soap, biscuits, sugar confectionery, and cigarettes. Still other markets in which British firms operated, such as cotton, iron and steel, and shipbuilding, were more international in scope. In the late nineteenth century in most markets there was an increase in competition, and in particular manufacturers involved in international trade became aware of an intensification in foreign competition, especially from the US and Germany.

In the area of employment relations the pattern delineated in earlier chapters may be summarised as follows. From the nineteenth century onwards British employers relied to a large extent on market mechanisms and externalised their employee relations; they hired and fired as demand dictated; they provided minimal training; and wages were related in various ways to market criteria, such as the ‘going rate’ for labour or the selling price of the product. The attachment of the worker to the employer was limited and internal employment systems were rudimentary. In some firms this pattern was tempered by vestiges of traditional paternalism of an ad hoc, personal nature. However, this was of decreasing applicability to the large, multi-plant enterprise which emerged during the course of the twentieth century. Yet in only a few such large firms had more complex internal employment systems developed by the end of the interwar period.

In the post-Second World War years, economists have identified and analysed so-called internal labour markets. By this, they mean that employment systems can exist within firms which are relatively insulated from the external market and are regulated by a complex set of internal administrative rules and procedures. Thus firms hire workers into a limited number of entry jobs and then rely upon training and promotion to fill the majority of higher level jobs. To this end, jobs within the firm are ordered into something like a promotional hierarchy and, in competing for these jobs, employees are not subject to strong competition from workers outside the firm.

In Chapter 2 it was argued that in terms of the employment relationship nineteenth-century employers pursued strategies of externalisation and did not develop strong internal labour systems. The predominant pattern of employment in British industry was one of loose association of employers with their labour force and of employees with the firms for which they worked. Firms relied on the external labour market for hiring and firing, they took labour on and laid it off as market conditions dictated, and most paid minimal attention to the training of employees. Wages were largely fixed according to external market signals and nonwage benefits were rudimentary. At the same time, however, a small number of firms pursued different strategies and developed something more like internal labour markets, with more complex and elaborate employment systems. During the first half of the twentieth century, this basic pattern did not change greatly. With the exception of wartime, labour market circumstances did not encourage major change and weak organisational structures and managerial hierarchies were a constraint on the development of more elaborate employment systems. However, there were some important developments during this period and this chapter investigates a number of diverse aspects of employment – the tenure of jobs, patterns of recruitment and training, the payment of wages, and the increasing importance of non-wage benefits.

The market context

The interwar years were characterised by large-scale unemployment sandwiched between periods of wartime full employment. The extremely tight labour market which developed during both wars produced some similar consequences.

The management of people at work has always been a central problem and challenge for employers. It is a universal problem, but it has been tackled in different ways, at different times, in different countries. As the first industrial nation, Britain occupies a distinctive position with a long legacy of traditions and practices which still influence the way labour is managed in the modern business enterprise. The management, and mismanagement, of labour has had profound consequences for British society and national competitiveness.

This book investigates the development of labour management in Britain. It begins with the inheritance from the nineteenth century and traces continuities and change in the twentieth-century business enterprise. It concentrates mainly on the management of manual workers in industrial enterprises since it was here that the historically predominant pattern of labour management was established. A major theme is that, at an early stage during the process of industrialisation, British employers made certain critical choices about the ways in which labour should be managed. Though at the time these choices had a certain rationality, in the longer term they proved short-sighted and less appropriate. Yet they set a pattern which persisted and profoundly influenced the management of labour in the twentieth-century business enterprise. It is the argument of this book that the outcome of these choices contributed significantly to Britain's relatively poor economic performance from the late nineteenth century onwards.

The book seeks to bridge the gap between traditional business history and labour history. In addition it draws upon contemporary studies of business management, industrial relations, and personnel management.