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International HRM and Industrial Relations

Submitted by
Arvind Kumar Topno (14HS60002)

Introduction
Industrial relations in countries, sub-regions and regions, have been influenced by a variety of
circumstances and actors such as political philosophies, economic imperatives, the role of the
State in determining the direction of economic and social development, the influence of unions
and the business community, as well as the legacies of colonial governments.
While the issues associated with the management of international human resources have received
significant attention in the literature, industrial relations (IR) issues have not received the same
degree of attention. One of the main reasons for that is -- Globalization has led employers to
push for less regulation of IR, less standardization of the employment relationship, and a greater
focus on the workplace as the centre of gravity of IR. Employers as well as some governments
are viewing IR from a more strategic perspective, i.e., how IR can contribute to and promote
workplace cooperation, flexibility, productivity and competitiveness. It is increasingly
recognized that how people are managed impacts on an enterprise's productivity and on the
quality of goods and services, labour costs, the quality of the workforce and its motivation.
The international HRM of MNCs is subject to dual pressures. On the one hand, there are
pressures for internal consistency. This applies particularly for ethnocentric and geocentric
MNCs which aim to have similar employment practices world-wide. On the other hand, foreign
subsidiaries of MNCs face pressures for adaptation from local institutions.
The focus of this study is on delineating the IR systems of various countries or regions with a
particular focus on variations between countries or regions in terms of levels of trade union
density, industrial conflict, industrial relations institutions and the like. The focus of comparative
studies is on the phenomena outside the workplace which determine and regulate the nature of
employment relations in specific nation states or even within regions (for example within the
European Union). For example the emphasis on industry level bargaining and employee
participation in the workplace via works councils which characterize the German IR system visà-vis the concept of employment-at-will and antipathy toward trade unions which underscore the
US system. Issues which involve wages, employee participation, training and dismissal cannot
be dealt with without taking into account a variety of collective agreement provisions set forth by
the government. At the national level, then, there is an inextricable link between the nature and
form of human resource management as practiced in companies, and the culture and structure of
industrial relations in the country concerned.
Need for Research
In today’s global world Multinational corporations and organizations are functioning in several
countries. It is very essential to understand the rules, regulations, procedures, laws, local and

He also explained that industrial relations cannot be understood without an understanding of the way in which rules are established and implemented and decisions are made in the society concerned. Brewsler (1989). Objective To study the Industrial Relations in international HRM context and compare the labour relations of various countries. this report has summarized some key aspects and integrated models of industrial relations. Schregle (1981) has observed that industrial relations phenomena are a very faithful expression of the society in which they operate. Poole (1986) has identified several factors that may underline these differences: • The mode of technology and industrial organization at critical stages of union development. Limitations of the study The main limitation of this study is that this paper did not use the primary source of data collection and it is purely based on secondary research data. Despite these limitations. Its findings can be helpful for designing human resource management and industrial relations for international personnel of multinational and international entities. harmony and industrial peace which is very essential for not only the growth and prosperity of any company but also for the development of economies.national policies and social and cultural orientation of any country towards industrial relations aspects and approaches to handle and solve the industrial relations disputes. • The influence of political parties on trade union development. and Abegglen (1984). • Ideological divisions within the trade union movement. It will help the MNEs to understand and deal with local country specific industrial relations issues and disputes. of its characteristics/ features and of the power relationships between different interest groups. Poole (1986). . Peter and Water (1982). The method of research includes comparison of various labour laws. Research Methodology The research method consists of literature review and secondary data and information. Schregle ( 1981). Noda (1989). Review of existing literature There has been various literature survey on international human resource management and industrial relations by De Nijs ( 1989). It helps to smoothen the functioning of MNC as well as create an atmosphere of trust. Drucker(1989). The major source of secondary data is through research journals. “A human resource manager of a multinational and national organization must establish a standard labor-management relation system in order to encourage higher workers productivity and faster rate of economic growth of the organization as well as the country”. Vogel (1987). ILO research papers and respective country’s labour laws. Prahalad and Doz(1987). According to De Niji (1989). IR practices and methods to resolve and handle disputes and union activities. • Methods of union regulation by government.

contribute to their highest potential for the overall achievement of organizational objectives and they will be lesser instances of industrial conflict. Mead (1996) observed that Japanese managers see employees as a valuable asset that provides their firms with sustainable competitive advantage. they will. attitude of employees and very effective industrial relations practices in place. These are as follows: a) First. demographics etc. Many European trade unions of former USSR countries considers the collective . every country has different set of ideologies. Japan’s has achieved remarkable level of productivity and technological advancement post world war destruction the whole credit most of the researchers and management experts. it is important to realize that it is not only very difficult but also very complex to compare industrial relations systems and behaviors across national boundaries. involvement and recognition of its employee. The successful companies of USA. political and legal systems. these factors play a very important role in shaping the industrial relation systems of any country a labor relations concept may change considerably when translated from one industrial relations context to another. 1989). progress and harmony. They not only consider but treat each other as equal partner in running the business for overall industrial peace. Japan has the lowest incidents of labor unrest and industrial conflicts among the industrially developed nations and the number of man-days lost due to strikes and lockouts is only one eighth than in the United States (Noda. Brewster (1989). Noda (1989). Drucker (1989) said that Japanese firms encourage productivity through the development. financial and economic orientations and objectives. Finally. multinationals must identify and analyze various shortcoming and admitting good industrial relation policies which will be flexible enough to adapt to local requirements. Germany and other European countries also hold this belief-treating people as asset because it is the company’s human resource which is responsible for success and progress of any organization. Prahalad and Doz (1987) notes that the lack of familiarity of multinational HR and IR managers with local industrial relations system and political conditions has sometimes needlessly worsened a conflict that a local firm would have been likely to resolve. If workers are treated as equal partners and as dignified human beings. Experts and researchers characterize Japanese system of labor-management relations as harmonious and collaborative. Successful companies of USA. before examining the key issues in labor relations as they relate to multinational firms. Increasingly. for example. also put top emphasis on the philosophy of achieving high level of productivity through people. Cross-national differences also can be easily visible as to the objectives of the collective bargaining process and the enforceability of collective agreements. in the United States is consider as a means to negotiate between a labor union local and management. as a rule. and Abegglen. religion. on the other hand in case of Sweden and Germany the term collective bargaining means to have negotiations between an employer’s organization and a trade union at the industry level. Vogel (1987) has explained Japanese managers and employees have such strong belief that they cannot run industry if they always indulge in conflicting mode with each other and consider other party as enemy. as opined by Peter and Waterman (1982). Japanese managers treat workers as a dignified human beings and partner in the business processes. 1984) give to its unique style of management that emphasizes sound labor-management relations. co-operation.• Managerial Strategies for labor relations in large corporations. culture. we should look upon some general points about the field of international labor relations for better understanding and clarity. The concept of collective bargaining.

US approach to labour relations  Collective Bargaining: It is the process in which formal labor agreements are reached between union and management representatives. which is clearly observed as differing significantly from the models of governing society. social. and conditions of employment and the administration of the labor contract. and by how much. it has the legal authority to negotiate with the employer and administer the labor contract Steps of grievance procedure     Efforts are made to resolve the conflicts at the lowest level of the hierarchy as quickly as possible First step usually involves a meeting between the representative of the worker (shop steward) at the operating level and the employee’s supervisor – they basically attempt to agree on how to resolve the grievance Unresolved issues and grievances may involve union officials and higher-level management representatives – these conciliatory approaches usually solve the grievance Sometimes the matter ends up in the hands of a mediator or an arbitrator or both the parties approach to labour courts to legally resolve the dispute. Definitions of what exactly constitutes the European social model differ. but it certainly includes the institutions and processes of industrial relations. political orientation. it involves the negotiation of wages. it is widely considered that there is a distinctive 'European social model'. International comparison of industrial relation systems in this area can thus help to make clearer what the European social model is and how. culture demography. Mediator: A person who brings and mediates between both sides (union and management representatives) together and helps them to reach a settlement that is mutually acceptable Arbitrator: An individual appointed by proper agreement by both union and employer who provides a solution to a dispute that both sides (union and management representatives) have been unable to resolve themselves and that both sides agree to accept. the economy and the labour market found in the USA. it is generally recognized in the international labor relations field that no industrial relations system can be understood without an appreciation of its historical origin. Industrial relations systems and developments play an important role in determining economic. hours. technology financial and economic orientation. More broadly.  Three of the most common arbitration approaches for resolving wage-related issues include: . cultural and technological outcomes and are thus a key area of comparison. Japan and elsewhere.  Union: An association of worker that represents the workers in collective bargaining negotiation. it differs from the models which characterize other countries. b) Second. whereas in the United States trade unions tend towards a pragmatic economic view of collective bargaining rather than an ideological view.bargaining process as an ongoing class struggle between labor and capital which is the ideology of Marxist industrial relations orientation.

and ultimately. • Employees in Europe (including those at managerial levels) often have their union associations.  The outcome is a result of effective labor relations strategies between employer and workers. Workers are often compelled to accept conditions of employment set by management  UK  A labor agreement between worker and employer in UK is not a legally binding contract. India.  Violations of the agreement by the union or by management carries no legal actions or penalties  Unions in UK are relatively powerful and strikes are more prevalent than in the United States . the profits  Labor costs in the US are observed lower in recent years than in most other major industrial countries. U.  Thanks to union–management cooperation and coordination. and Southeast Asia Workers and their unions are less powerful. unions.S.   50/50 split: Splitting the difference between the demands of the employer and workers Either/OR: Using an either-or approach: One position or important demands of the parties are fully supported and the other less important ones are rejected What’s Fair: To determine a fair wage based on economic conditions. productivity. In India Trade Union believe in class conflict hence there are many incidents of strikes and labour unrest There is heavy political interference in Trade union and labour problems and most of the unions are affiliated and associated with one or more political parties. There are issues of multiple unions and union rivalry. • Worker unions in Europe have more political power than U.       In developing and emerging economies such as China.S. companies and employers have been able to introduce high-technology and efficient machinery. • Worker unions in Europe have long history than those in the United States and it occupies a more accepted position in society. Labor Relations in other countries  Europe: • In European firms typically negotiation agreements takes place with unions at the national level. Importance of positive labour relations  They directly affects the labor costs.

Myanmar (Burma). Laos. Malaysia. Cambodia. whether in the name of economic development. national unity. Singapore. and Vietnam  Many states are still keeping labor rights under check. East Timor. Philippines.  Union membership in UK has declined in recent years Labor agreements in UK do not usually include provisions for arbitration of disagreements or grievances      Germany Workers have rights and they are addressed more carefully by the management The power of Union in Germany is very strong Union membership is voluntary—there is generally one union in each major industry Individual workers have rights to negotiate either individually or collectively with management to secure wages and benefits that are superior to those spelled out in the agreement even when covered by a labor contract  Japan  Social practices shapes non-confrontational union–management behavior  Provisions in Japanese labor agreements are usually vague. but they are legally enforceable  Disputes and other issues are settled in an amicable manner but sometimes resolved by third-party mediators or arbitrators  There are labor commissions which have been established by law  Japanese unions are relatively weak than European unions  China  The Chinese economy has shifted from a command economy to a more market based economy  An increasing emphasis is being placed on the importance of the collective contract system  Integration of trade unions into workplace management continues to prevent collective consultation from providing an adequate framework for the full rights and freedom and regulations of labor relations  Labor problems in China has become a point of contention in international trade and human rights discussions  Southeast Asia including Brunei. Indonesia. Thailand. or social stability  Labor rights are fragmented or constrained due to the political environment  Labor policies in Southeast Asia have been influenced by market-based policies of international competition .

S. sudden or unauthorized strikes (commonly called “wildcat strikes”) are uncommon.  The grievance procedure is used to resolve the issues peacefully  Once the agreement period is over and if a new one is not successfully negotiated:  Workers may call a strike or continue to work without a contract while threatening to walk out  Management also can resort to lock-outs but it is very rare       UK Worker unions are relatively powerful (has decreased in recent years) Strikes in UK are more prevalent than in the United States Labor contracts typically do not prohibit strikes and the general public is more used to and tolerant of them System is not geared toward the efficient resolution of disputes In UK generally it still appears willing to accept conflict with resulting strikes and lockouts as the price of protecting the rights of the workers  Germany  Strikes and lockouts are prohibited in Germany during the period when a labor negotiation agreement is in effect  A strike is legal when the agreement has run out and a new one has not yet been ratified by the workers  German unions tend to be industry wide—a firm quite often has several agreements in action with different termination dates  There tends to be a fair amount of cooperation and coordination between management and worker unions because of the way labor relations are legally structured  Japan  Strikes and lockouts in Japan are very rare  Japanese workers sometime strike when a union is under negotiation with management during industry wide strike to show support for their union  Cultural value of Wa implies that individuals should subordinate their interests and identities to those of the group  There cultural values accounts for much of the harmony that exists between management and labor in Japan.Industrial conflict around the world  US  Most of the U. . thus. labor relations have a specific provision that outlaws strikes.

efficiency. to be negotiated between a “European union” and employers  Several systems of industrial democracy exist in European countries and elsewhere  One system may be more prevalent than others in some countries  It is common to find a number of these forms existing simultaneously  Codetermination: It involves the participation of workers on the level of board of directors  The EU Council of Ministers recently issued a directive requiring all companies with 50 or more employees to “inform and consult” workers’ representatives about company strategy by 2008  Work councils functions in all European countries firms.  Productivity or gain-sharing – workers and management share productivity gains in a predetermined ratio  It has not been widely adopted in other countries  It has gained some prominences in a number of U. especially those using gain sharing as a team incentive for performance improvement. working conditions.Common forms of industrial democracy  The European Commission has stated that a primary objective is to obtain a minimum threshold of social rights for workers.  Some councils are worker. Industrial democracy in selected countries  US  Collective bargaining is the most common type of industrial democracy – guidelines are enacted as per law.  NLRB certified unions are the exclusive bargaining agent for employees authorized to represent workers in negotiation and administration of labor–management relations .  Basic function of Work council is to improve company performance. and job security. firms.S.  Workers are elected typically to serve on the council  Management representatives are appointed by the management of the company.  Some common forms of shop floor participation include:  Worker involvement programs  Quality circles  Other forms of participative management  QWL (quality of work life) programs are currently popular in manufacturing and assembly plants  Most common forms of financial participation:  Profit sharing between workers and employer.or union-run – others are chaired by management representatives.

 Problem solving teams: Worker groups discuss ways to improve quality. safety groups made up of a supervisor and an elected employee representative. efficiency. cooperation committees consisting of worker and management representatives. and participation on safety committees that are headed by a manager. workers representation on boards of directors.  UK  Industrial democracy in UK takes the form of collective bargaining and worker representation through the use of unions  Worker groups in UK elect a chief spokesperson or steward to have their interface with management  Union councils represent unionized employee to ensure workers are treated fairly and in dignified manner by management. it consists of individuals who learn all the tasks of all group members and team members rotate jobs.  Indirect form includes use of shop stewards on the work floor.S. and overall work environment  Special purpose teams: Worker groups that design and introduce work reforms and new technology  Self-managing teams: Worker groups perform supervisory duties and manage themselves. firms  Management boards are responsible for day to day operation  Employees in each plant elect a plant work council  Members of plant work councils in multi-plant companies also serve on a company work council  Denmark  Danish workers participate in the management of their company affairs both directly and indirectly  Direct form includes use of semiautonomous work groups that provide ideas on how to enhance productivity and quality and how to schedule the work. This may create a problem if the spokespersons or stewards in the company disagree with the union councils  Germany  Industrial democracy and codetermination practices are very strong in Germany  Worker unions are charged with handling the collective bargaining with management  German law has established internal boards to ensure codeterminism in the workplace  Supervisory boards are similar to a board of directors in U.  Sweden  Industrial democracy in Sweden is directed very heavily toward ensuring quality of work life (QWL) and worker participation in the operation of the daily activities .

Recommendations In order to overcome the barriers to effective international regulations for making active industrial relations to resolve disputes and establish industrial harmony between labour and management. the workers (not the party members) represented industrial democracy in communist countries. workplace safety. safety. Semiautonomous work teams and a cooperative spirit between employer and workers are key elements of Swedish industrial democracy  Swedish firms have workers as members of their board of directors. Worker board participants receive formal training and spend time with other workers on the board to ensure they are competent enough to complete their tasks  China  Chinese enterprises traditionally had 2 policy-making committees  Communist Party leaders and members  Managers and worker representatives  The political climate determined which committee had more power  After reforms in the 1980s. ILO and OECD. legal. ideology and philosophy towards worker and union must be aligned with local industrial relations ideologies and system. health. collective bargaining. job satisfaction. The Chinese government has agreed to an ambitious program of cooperation with the ILO which will provide advice on such things as job creation. cultural. . welfare and the settlement of labor disputes  Japan  Industrial democracy in Japan is not closely associated to political philosophy  Japanese firms are oriented more towards the operating philosophy of enhancing worker performance  Management is receptive to workers’ ideas that will produce bottom-line results  Due to the basic nature of Japanese union–management relations there is very little industrial democracy in comparison with European firms.  Management attitude. traditional related with labour relations systems across countries management of industrial relations should be delegated to subsidiaries. the recommendations are as follows:  As there are various differences in economic. political.  IHRM managers must possess the knowledge about international laws and regulations developed by EC.  Managers at local subsidiary should set up international human resource management approaches according to the national laws and philosophy of each subsidiary  Managers must possess some prior experience and have proper understanding of national industrial relation systems while dealing with labour issues because European system is different from American system in case of labour relations.

customs and must respect the local industrial relation ideologies and orientation of the worker because it is finally the human resource of the organization that will bring the overall success to achieve goals and objective of any organization.ILO publications.europa. References Collings G.1998 Sriyan de Silva. Industrial relation issues are very sensitive and need to be handled with proper care and caution as it involves not only compliance with laws and regulation of local country but it also involves the sentiments.com/1/key-issues-in-international-industrial-relations/ .”International Human Resource Management and Industrial Relations: A Framework for Analysis”. ILO publications.2. culture.May. Conclusion The impact of globalization requires IR systems to adapt to ensure improved economic competitiveness. “Industrial relations and globalization: Challenges for employers and their organizations”.1997 Muller Michael. IJHRM.Vol. Any MNC to succeed in any region or country must adapt to local tradition.10.eu/observatories/eurwork/articles/industrial-relations-in-the-eujapan-and-usa-2002 http://universalteacher. “Multinational corporations and industrial relations research: A road less travelled” IJMR.” The Changing Focus of Industrial Relations and Human Resource Management”. Jul-Dec 2011 http://www. practices.issue 2 Macdonald David.David. May. “Human resource and industrial relations practices of UK and US multinationals in Germany”. tradition and customs of employees of any particular country. Employers and their organizations therefore have the most important role in generating the responses needed to take advantage of these new and emerging circumstances.Aug. ASA University Review.Vol.eurofound. flexibility and overall efficiency to respond to changing international market circumstances for any Multinational enterprises. 1997 Sheikh Abdur Rahim.5 No. IHRM manager should analyze labour relation issues that are common in all the countries and also conduct the practices in each of the countries in which MNC operates and develop a standard policy.