Monday, March 13, 2006

Allan Barber: Asure should consider merger

The dispute between the meat inspectors and their employer, Asure New Zealand, which dragged on for four months and was settled late last week, happened at a bad time for the meat industry.

The season was finally getting into gear after a very difficult first few months, with livestock volumes on the point of enabling processors to open all their plants with good throughputs, when - hey, presto! - the meat inspectors decided to take action in support of their wage claim.

The impact on the industry so far has been more of an irritation than a serious problem, because when the meat inspectors work to rule, they are doing only what their contract specifies, instead of performing extra duties on behalf of the plant.

This can cause severe disruption depending on how well the individual plant's quality-assurance systems are working.

The dispute appears to have been over only a small amount of money: Asure offered 4.5 per cent in response to the employees' demand of 5 per cent.

Details of the final settlement haven't yet been made public, but it appears the costs of meat inspection have risen by at least 37 per cent since Asure was established in 1999.

The immediate question is why the meat inspectors' award took so long to settle, from the early part of the season into nearly the busiest period.

If agreement hadn't been reached last week, further extension of the work to rule would have had a severe impact on the industry.

A more far reaching question is whether the meat industry should be forced to rely on a unionised labour pool which it doesn't control but whose costs it has to carry. The fact that it's still a Government-owned, mandatory monopoly adds insult to injury when meat processors spend enormous resources on employment relations strategies to keep costs down.

The Chairman's Review in Asure's recently published annual report contains some relevant points.

The first indicates that, although Government organisations have always been allowed to provide meat inspection services, industry or third-party competition is now legislatively permitted in the local sector, but not yet for export markets,

The next highlights a proposal from AgriQuality, the other SOE spun out of the Ministry of Agriculture and Forestry, to merge with Asure.

Although AgriQuality is already allowed to offer meat inspection because it is Government-owned, and Asure is resigned to the fact that competition is inevitable, Asure's board would rather remain separate - and possibly weaker as a result - than merge to form a stronger entity.

The third point is that industrial relations may pose a challenge because "changing operating requirements create ongoing issues that require attention. Asure intends to address these issues in good faith recognising both the role of key staff and the future contestability of meat inspection".

It appears the writing was already on the wall for industrial unrest.

Asure should look seriously at whether it is better off merging with its sister SOE to form a stronger entity with greater flexibility in its employment base.

The meat industry has long awaited a greater degree of influence over an important group of employees that work for another party. It may not welcome the merger of two Government-owned organisations, but this may bring contestability closer.

* Allan Barber is a freelance writer, business consultant and past chief operating officer at processor Affco.

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