Hofstede's Cultural Dimensions: Power Distance

Hofstede’s Cultural Dimensions
June 17, 2017 Administrator 2 Comments Collectivism, Cross Cultural

Management, Culture, Femininity, Hofstede, Individualism, Indulgence, Masculinity, Power Distance, Time
Orientation, Uncertainty Avoidance
Cultures around the world are getting more and more interconnected and the business
world is becoming increasingly global. For managers this means that they should be able
to work with a large variety of people from different countries and cultural backgrounds.
However, since most people are so strongly immersed in their own culture, they often fail
to see how it affects their patterns of thinking or their behavior. To overcome this,
researchers suggest some kind of tools or mechanisms with which to compare countries
on cultural similarities and differences. A number of attempts have been made to combine
these cultural differences across borders (e.g. the GLOBE study, Trompenaars’ cultural
dimensions and Hall’s cultural dimensions). However, the most-used and best-known
framework for cultural differences is Geert Hofstede’s Cultural Dimensions. Over the
years, his study led to six cultural dimensions on which countries can be ranked: Power
Distance, Individualism/Collectivism, Masculinity/Femininity, Uncertainty
Avoidance, Long-term/Short-term Orientation and Restraint/Indulgence. Each
dimension will be elaborated on below:
Figure 1: Hofstede’s Cultural Dimensions
Power Distance
This dimension expresses the degree to which the less powerful members of a society
accept and expect that power is distributed unequally: beliefs about the appropriate
distribution of power in society. The fundamental issue here is how a society handles
inequalities among people. People in societies exhibiting a large degree of Power
Distance accept a hierarchical order in which everybody has a place and which needs no
further justification. In societies with low Power Distance, people strive to equalise the
distribution of power and demand justification for inequalities of power. China and Saudi
Arabia are countries with a high Power Distance index.
Individualism
The Individualism/Collectivism dimension is about the relative importance of individual
versus group interests. The high side of this dimension, called individualism, can be
defined as a preference for a loosely-knit social framework in which individuals are
expected to take care of only themselves and their immediate families. Its opposite,
collectivism, represents a preference for a tightly-knit framework in society in which
individuals can expect their relatives or members of a particular in-group to look after
them in exchange for unquestioning loyalty. A society’s position on this dimension is
reflected in whether people’s self-image is defined in terms of “I” or “we.” The USA is
considered as one of the most individualistic countries in the world.
Masculinity
The Masculinity/Femininity dimension is about what values are considered more
important in a society. The Masculine side of this dimension represents a preference in
society for achievement, heroism, assertiveness and material rewards for success. Society
at large is more competitive. Its opposite, femininity, stands for a preference for
cooperation, modesty, caring for the weak and quality of life. Society at large is more
consensus-oriented. In the business context Masculinity versus Femininity is sometimes
also related to as “tough versus tender” cultures. Japan is considered to be a very
masculine country, whereas Scandinavian countries such as Norway and Sweden are
considered highly feminine.
Uncertainty Avoidance
The Uncertainty Avoidance dimension expresses the degree to which the members of a
society feel uncomfortable with uncertainty and ambiguity. In addition its impact on rule
making is taken into account. The fundamental issue here is how a society deals with the
fact that the future can never be known: should we try to control the future or just let it
happen? Countries exhibiting a high Uncertainty Avoidance maintain rigid codes of belief
and behaviour and are intolerant of unorthodox behaviour and ideas. These countries
often need many rules to constrain uncertainty. Countries with a low Uncertainty
Avoidance index maintain a more relaxed attitude in which practice counts more than
principles, tolerance for ambiguity is accepted and the need for rules to constrain
uncertainty is minimal. South American countries such as Chile, Peru and Argentina are
highly uncertainty avoiding countries.
Time Orientation
Every society has to maintain some links with its own past while dealing with the
challenges of the present and the future. Societies prioritize these two existential goals
differently. Countries that score low on this dimension, for example, prefer to maintain
time-honoured traditions and norms while viewing societal change with suspicion. They
are past and present oriented and value traditions and social obligations. Countries
with cultures that scores high on this dimension on the other hand take a more pragmatic
approach: they are future oriented and encourage thrift and efforts in modern education as
a way to prepare for the future. Asian countries such as China and Japan are known for
their long term orientation. Morocco is a short term oriented country.
Indulgence
The Indulgence dimension is a relatively new dimension to the model. This dimension is
defined as the extent to which people try to control their desires and impulses, based on
the way they were raised. Relatively weak control is called Indulgence and relatively
strong control is called Restraint. Cultures can, therefore, be described as Indulgent or
Restrained. Indulgence stands for a society that allows relatively free gratification of
basic and natural human drives related to enjoying life and having fun. Restraint stands
for a society that suppresses gratification of needs and regulates it by means of strict
social norms.
Figure 2: Hofstede’s Cultural Dimensions Framework

Dimensions of culture are an important aspect of international business. Knowing how
cultures view different aspects of business can help a manager navigate through the
international business market.
Hofstede's Cultural Dimensions

You know, dogs are interesting animals. If you have ever watched a group of different
breeds of dogs together, you see that there are dogs who are aggressive, those that are
mellow, some want to be the alpha male and some are content just playing and having a
good time. These different dimensions are very similar to Geert Hofstede's cultural
dimensions theory, a theory that looks at unique aspects of cultures and rates them on
a scale for comparison. Now, I am not trying to say dogs to humans are the same, but
the way they interact is quite similar.
The Different Types of Hofstede's Dimensions

Geert Hofstede is a professor who researched how people from different countries and
cultures interact based on different categories of cultural dimensions. Those categories
are:
 Power Distance: This dimension expresses the degree to which the less
powerful members of a society accept and expect that power is distributed
unequally.
 Individualism vs. Collectivism: This dimension focuses on the questions about
whether people prefer a close knit network of people or prefer to be left alone to
fend for themselves.
 Masculinity vs. Femininity: Masculinity represents a preference in society for
achievement, heroism, assertiveness and material reward for success. Its
opposite, femininity, stands for a preference for cooperation, modesty, caring for
the weak and quality of life.
 Uncertainty Avoidance: This dimension expresses the degree to which the
member of a society feels uncomfortable with uncertainty and ambiguity.
 Long-term vs. Short-term Orientation: Long-term orientation dimension can be
interpreted as dealing with society's search for virtue. Societies with a short-term
orientation generally have a strong concern with establishing the absolute truth.
What Do These Mean?

As we look at the different aspects and definitions of these dimensions, we can begin to
see how a manager would have to deal with them and interpret them in an international
setting. Just looking at individualism versus collectivism shows us that there are
societies, or people, that accept working alone and look at their existence in terms of
being an individual rather than part of a group. However, a collectivist would look
towards the group's success more so than their own personal satisfaction or
accomplishments. Would it surprise you that the U.S. is high on the individual scale
while Japan is more on the collectivist side? This means we Americans think more 'I'
than 'we,' while Japan is exactly the other way around.
Staying with this example, the U.S. has a low score for uncertainty avoidance. Basically,
we are okay with ambiguity and not knowing everything for certain. On the other hand,
Japan is very high on this scale, and they do not want uncertainty; they want facts.
By now, you are likely thinking that one country compared to another; one will be high
and one will be low. That is not the case though. Take, for example, power distance.
Japan and the U.S. are almost equal when it comes to their acceptance of the
distribution of power.
Knowing what you do now about these two countries, where do you think they land on
long-term versus short-term orientation? This, like the other dimensions, directly relates
to their culture and societal norms. To that point, the U.S. is lower in the masculinity
versus femininity scale, while Japan is much higher. Thus, Japan looks for a more
harmonious world where everyone works together, but Americans are fine being the
hero.
Dimensions of culture are an important aspect of international business. Knowing how
cultures view different aspects of business can help a manager navigate through the
international business market.
Hofstede's Cultural Dimensions

You know, dogs are interesting animals. If you have ever watched a group of different
breeds of dogs together, you see that there are dogs who are aggressive, those that are
mellow, some want to be the alpha male and some are content just playing and having a
good time. These different dimensions are very similar to Geert Hofstede's cultural
dimensions theory, a theory that looks at unique aspects of cultures and rates them on
a scale for comparison. Now, I am not trying to say dogs to humans are the same, but
the way they interact is quite similar.
The Different Types of Hofstede's Dimensions

Geert Hofstede is a professor who researched how people from different countries and
cultures interact based on different categories of cultural dimensions. Those categories
are:
 Power Distance: This dimension expresses the degree to which the less
powerful members of a society accept and expect that power is distributed
unequally.
 Individualism vs. Collectivism: This dimension focuses on the questions about
whether people prefer a close knit network of people or prefer to be left alone to
fend for themselves.
 Masculinity vs. Femininity: Masculinity represents a preference in society for
achievement, heroism, assertiveness and material reward for success. Its
opposite, femininity, stands for a preference for cooperation, modesty, caring for
the weak and quality of life.
 Uncertainty Avoidance: This dimension expresses the degree to which the
member of a society feels uncomfortable with uncertainty and ambiguity.
 Long-term vs. Short-term Orientation: Long-term orientation dimension can be
interpreted as dealing with society's search for virtue. Societies with a short-term
orientation generally have a strong concern with establishing the absolute truth.
What Do These Mean?

As we look at the different aspects and definitions of these dimensions, we can begin to
see how a manager would have to deal with them and interpret them in an international
setting. Just looking at individualism versus collectivism shows us that there are
societies, or people, that accept working alone and look at their existence in terms of
being an individual rather than part of a group. However, a collectivist would look
towards the group's success more so than their own personal satisfaction or
accomplishments. Would it surprise you that the U.S. is high on the individual scale
while Japan is more on the collectivist side? This means we Americans think more 'I'
than 'we,' while Japan is exactly the other way around.
Staying with this example, the U.S. has a low score for uncertainty avoidance. Basically,
we are okay with ambiguity and not knowing everything for certain. On the other hand,
Japan is very high on this scale, and they do not want uncertainty; they want facts.
By now, you are likely thinking that one country compared to another; one will be high
and one will be low. That is not the case though. Take, for example, power distance.
Japan and the U.S. are almost equal when it comes to their acceptance of the
distribution of power.
Knowing what you do now about these two countries, where do you think they land on
long-term versus short-term orientation? This, like the other dimensions, directly relates
to their culture and societal norms. To that point, the U.S. is lower in the masculinity
versus femininity scale, while Japan is much higher. Thus, Japan looks for a more
harmonious world where everyone works together, but Americans are fine being the
hero.
Introduction
Most people would agree that communication between two individuals should
be simple. When you communicate, you are successful in getting your point
across to the person you're talking to.
It's important to remember that there are differences between talking and
communicating. When we talk, we tend to erect barriers that hinder our ability
to communicate. Some of the communication barriers during conversation
include:
 The use of jargon. Over-complicated, unfamiliar and/or technical terms.

 Lack of attention, interest, distractions, or irrelevance to the receiver.
 Differences in perception and viewpoint.
 Physical disabilities such as hearing problems or speech difficulties.
 Language differences and the difficulty in understanding unfamiliar
accents.
 People often hear what they expect to hear rather than what is actually
said and jump to incorrect conclusions.
Perceptual Barriers
Perceptual barriers are internal. If you go into a situation thinking that the
person you are talking to isn't going to understand or be interested in what you
have to say, you may end up subconsciously sabotaging your effort to make
your point. You will employ language that is sarcastic, dismissive, or even
obtuse, thereby alienating your conversational partner.
Think of movie scenarios in which someone yells clipped phrases at a person

they believe is deaf. The person yelling ends up looking ridiculous while failing
to communicate anything of substance.
Examples Of Perceptual Barriers

Examples of perceptual barriers that prevent individuals from effective
communication include:
 Perceptual Filters - We all have our own preferences, values,

attitudes, origins and life experiences that act as "filters" on our
experiences of people, events and information. Seeing things through the
lens of our own unique life experiences or "conditioning" may lead to
assumptions, stereotyping and misunderstandings of others whose
experiences differ from our own.
 Triggers and Cues - What we say is affected by how we say it (tone,
volume) and by our nonverbal cues, such as body language and facial
gestures. For example, you may perceive a situation differently if the
person you are speaking with is smiling or frowning, has body odour and is
standing too close or is not giving you direct eye contact.
Overcoming Perceptual Barriers

To overcome perceptual barriers within the workplace, there are a few things
you can do:
 The audience may make assumptions about you or the situation;

perhaps you are new to the organization, or the situation is a challenging
one. To get your message past these barriers, provide evidence to support
your claims and enhance your credibility.
 Effective communication relies on being aware of nonverbal aspects of

interactions with others. It is equally important to be aware of one's own
nonverbal behaviours and be sensitive to how they may be perceived. For
instance, maintaining eye contact when communicating indicates interest.
Staring out the window or around the room is often perceived as boredom
or disrespect.
Cultural Barriers
Cultural barriers are a result of living in an ever shrinking world. Different
cultures, whether they be a societal culture of a race or simply the work
culture of a company, can hinder developed communication if two different
cultures clash. In these cases, it is important to find a common ground to work
from. In work situations, identifying a problem and coming up with a highly
efficient way to solve it can quickly topple any cultural or institutional barriers.
Quite simply, people like results
Examples Of Cultural Barriers

Examples of cultural barriers that prevent individuals from effective
communication include:
 Generational - Each age group has a different general approach to

work, which often leads to conflicts with older workers describing younger
workers as "slackers," and younger workers criticizing older workers as
being "out of touch."
 Status and Resistance - Workers who are accustomed to workplaces
where seniority and status are emphasized may find it difficult to adapt to
more fluid environments, where job titles are de-emphasized and
production methods do not always follow a predetermined set of
guidelines.
Conclusion
Communication is not a one-way street. To have others open up to you, you
must be open yourself. By overcoming the seven barriers to communication,
you can ensure that the statement you are making is not just heard, but also
understood, by the person you are speaking with. In this way, you can be
confident that your point has been expressed.
Comparison between Japanese and American
Management Systems!
(i) Comparison of Managers:
A study conducted by Haire Ghisell, and Porter show that
Japanese managers are quite different from other managers
generally and from American managers specifically.
ADVERTISEMENTS:
Japanese managers (when compared to American managers)

are more apt to embrace reciprocal participative attitudes and
values and to perceive higher levels of self actualization
flowing from their roles and positions.
Japanese managers, more than American managers, have

internalized organizational goals concerning high
productivity, organizational growth and organizational
stability. The behavioural relevance of personal goals
achievement and creativity is higher for Japanese managers
while the behavioural relevance of job satisfaction and
individuality is higher for American managers.
(II) Comparison of Workers:
Japanese workers have greater trust and acceptance of
management decisions concerning application of practices
and policies than do American workers. Japanese workers
value working at high levels of capacity and assisting other
workers to a greater extent than do American workers, and
that this difference is increasing over time.
High level of work effort and commitment, organizational
involvement and cooperation, acceptance, and trust in
management policies and practices — all are the norm of
Japanese workers; they are not for American workers.
(iii) Comparison of Societies:
ADVERTISEMENTS:
Japanese people endorse social norms whereby uncertainty is

reduced through systems of rules leading to stability. The
Japanese tend to view themselves in collective terms rather
than in individual terms. These are the elements of Japanese
social norms which are very consistent with theory Z of
management as described by Ouchi. Americans score in the
opposite direction, high on individuality and low on
uncertainty avoidance and it is hardly consistent with theory
Z management practices.
Conclusions and Implications:

The real differences between Japan and the United States in
general social values and norms and in manager and worker
belief systems concerning work raise serious questions about
widespread transferability of Theory Z management to the
United States.
In Japan, Theory Z practices are consistent with the general

social norms and are generally supported by the actions of
labour organisations and governmental bodies. Japanese
organisations form a highly consistent and integrated
theoretical framework whose application works well in the
Japanese setting.
American management has not found an internally consistent

framework of management practices that develops long term
employee involvement, and our productivity suffers from this.
Thus, Theory Z management is not likely to become the
accepted norm in American companies to the extent it has in
Japan.
ADVERTISEMENTS:
The theory Z as given by Professor William Ouchi simply

suggests that involved workers are the key to increased
productivity. Such workers in large Japanese organizations
result from an internally consistent set of norms, practices,
and behaviours which are grounded in trust and
interpersonal intimacy.
Japanese organizations foster life time employment, slow

evaluation and promotion, non- specialized career paths,
implicit control mechanisms, collective decision making,
collective responsibility, and holistic concern in internally
consistent ways which produce worker’s involvement and
thus higher productivity. This is the Japanese way according
to Ouchi and it is theory Z way in which some American
Organizations now seem to operate.
International Industrial Relations
1. 1. Learning Objectives Understand the meaning and factors of industrial
relations. Analyze the role of three actors of industrial relations. Study the meaning,
structure and functions of trade unions. Discuss the influence, concern and impact of
trade unions on business and human resource management practices of multinational
companies.Chapter Ten International Industrial Relations 1
2. 2. Learning Objectives Understand the role of collective negotiations in
international human resource management. Analyze various reasons for and
approaches to settle industrial conflicts. Study the role of quality circles and participative
management in international industrial relations.Chapter Ten International Industrial
Relations 2
3. 3. Structure1. Introduction2. Three Actors of Industrial Relations.3. Trade
Unions.4. Concerns of Trade Unions in Multinational Companies.5. Collective
Negotiations.6. Disputes / Conflicts.7. Quality Circles and Participative Management.8.
SummaryChapter Ten International Industrial Relations 3
4. 4. 10.1 Introduction Human resource management practices result in creation of
relations among employees , management and trade unions. Such relations are called
Industrial Relations.Similarly, the human resource management policies and practices of
international business with regard to different country nationals [PCN, HCN & TCN]
result in relations among management of MNC and different kind of employees . Such
relations are called international industrial relations.These relations play a crucial role in
strategy formulation & implementation in international business either by enabling or
disabling the MNcs in the process of doing business in various countries.Chapter Ten
International Industrial Relations 4
5. 5. 10.1 IntroductionMeaningIndustrial relations means the relationship between
employees and the management in the day-today working of the industry. ILO defines “
Industrial relations deal with either the relationship between the state and employers’
and workers’ organizations or the relation between the occupational organizations
themselves”.International industrial relations deals with the complex relationships among
employers employing foreign national, employees of different nationalities, home and
host country governments and trade unions of the organizations operating in various
countries and their national & international federations.Chapter Ten International
Industrial Relations 5
6. 6. 10.1 IntroductionFactors of Industrial Relations[1] Institutional factors :Home
and host country government policy, labour legislation, voluntary courts, collective
agreement, employee courts, employers’ federations, social institutions like community,
caste, creed, system of power status etc in various countries form Institutional factors.[2]
Economic factors :Include economic organization, like capitalist, communist, mixed etc. ,
the structure of labour force, demand for and supply of labour force etc.Chapter Ten
7. 7. 10.1 IntroductionFactors of Industrial Relations[3] Technological factors
:Include mechanization, automation, rationalization, computerization, information
technology etc..[4] Social and Cultural factors :Include population, religion, customs and
traditions of people, ethnic groups, cultures of various groups of culture etc.[5] Political
factors :Include political system in the country, political parties and their ideologies, their
growth, mode of achievement pf their policies, involvement in trade unions etc.Chapter
Ten International Industrial Relations 7
8. 8. 10.1 IntroductionFactors of Industrial Relations[6] Governmental factors
:Include host and home country governmental policies like globalization policies,
industrial policy, economic polocy, labour policy, export policy, migration and immigration
policies etc.Globalization policies in countries like Bulgaria brought dramatic changes in
MNCs in that country. Early involvement of Trade Unions is advised when MNCs plan to
take over earlier Public enterprises where there is a tradition of trade unions.Chapter
9. 9. 10.2 Three Actors of Industrial RelationsIndustrial societies necessarily create
industrial relations defined as the complex of interrelations among workers, management
and the government. Three major participants or factors of industrial relations, thus, are
workers and their organizations, management and the government.[1] Workers and their
organizations :The total worker plays an important role in industrial relations. The total
worker includes working age, educational & family background, psychological factors,
social background, culture, skills, attitude towards others’ work etc.Chapter Ten
10. 10. 10.2 Three Actors of Industrial RelationsWorkers’ organizations, prominently
known as trade unions, play major role in industrial relations. The main purpose of trade
unions is to protect the workers’ economic interests through collective bargaining and by
bringing pressure on the management through economic and political tactics. Trade
union factors include leadership, finances, activities etc.[2] Employers and their
organizations :Employers employ expatriates, pay salaries and various allowances,
provide a variety of benefits, regulate the working relations through various policies,
rules and regulations & by enforcing labour laws of the country.Chapter Ten International
11. 11. 10.2 Three Actors of Industrial RelationsThey expect workers to follow rules &
regulations, contribute their resources to the maximum to achieve organizational goals
and mission. The difference between demands of the workers and employers results in
industrial conflict. Normally employers’ power is higher than that of their workers. But
their power is undermined when compared to that of trade unions.Employers form their
organizations to equate [or excel] their bargaining power with that of the trade unions.
These organizations protect the interest of the employer by pressurizing the trade union
and the government.Chapter Ten International Industrial Relations 11
12. 12. 10.2 Three Actors of Industrial Relations[3] Government :Government plays a
balancing role as a custodian of the nation. Government exerts its influence on industrial
relations through its labour policy, industrial relations policy, implementing labour laws,
the process of conciliation adjudication by playing the role of a mediator etc. It tries to
regulate the activities and behaviour of both employees’ and employers’ organizations,
individual and group organizations.Chapter Ten International Industrial Relations 12
13. 13. 10.3 Trade Unions.A trade union is a continuing long term association of
employees, formed and maintained for the specific purpose of advancing and protecting
the interests of the members in their working relationship. Some argue that it also covers
employers’ organizations and friendly societies.Workers join trade unions to attain
economic security or permanent employment with higher salaries and benefits. to
improve their bargaining power and balance it with that of the management.Chapter Ten
14. 14. 10.3 Trade Unions.Workers join trade unions – contd. to ventilate workers’
grievances to management. to inform workers’ views, aims, ideas and dissatisfaction /
frustration to management. to secure protection from unexpected economic needs like
illness, accidents, injury etc. to satisfy their social needs. to satisfy their needs for
belonging and to secure power.Chapter Ten International Industrial Relations 14
15. 15. 10.3 Trade Unions.Characteristics of trade unions trade union might be an
association of employees, employers or of independent workers trade unions are
relatively permanent combination of workers and not temporary or casual. trade union is
an association of workers who are engaged in securing economic benefits for their
members. the character of trade unions has been consistently changing. the origin and
growth of trade unions has been influenced by a number of ideologies.Chapter Ten
16. 16. 10.3 Trade Unions.Functions and role of trade unions to protect & promote
the interest of the workers and conditions of their employment. achieving higher wages
and better working & living conditions for the members. minimizing the helplessness of
the individual workers by making them stand collectively and increasing their resistance
power through collective bargaining; protecting members against victimization and
injustice of the employees. raising the status of the workers as partners of the industry
and citizens of the society by demanding increasing share for the workers’ in
management.Chapter Ten International Industrial Relations 16
17. 17. 10.3 Trade Unions.Functions and role of trade unions – contd. providing
worker self confidence and a feeling that he is not simply a clog in the machine. imbibing
sincerity & discipline in workers. taking up welfare measures for improving morals of the
workers; and to protect the right of to be consulted on all the matters affecting the
workers’ interests.Responsibilities of the trade unions-Promotion of international
priorities, generally influencing the socio-economic policies of the community through
active participation in their formulation at various levels and instilling in their members a
sense of responsibility towards industry and the international community.Chapter Ten
18. 18. 10.3 Trade Unions.Classification of Functions of trade unions –Militant or intra
mural functions: protecting the workers’ interests like hike in salaries and benefits, job
security, cultural adaptability programs, etc. through collective bargaining and direct
action.Fraternal or extra-mural functions: providing financial and non-financial assistance
to workers during the periods of strikes and lockouts, extension of medical facilities
during sickness and casualties, provision of education, recreation, recreational and
housing facilities, provision of social and religious benefits etc.Chapter Ten International
19. 19. 10.3 Trade Unions.Classification of Functions of trade unions – contd.Social
functions: carrying out social service activities, discharging social responsibilities through
various sections of of the society like educating the customers.Political functions:
affiliating a union to a political party, helping the political party in enrolling members,
collecting donations, canvassing during election period, seeking help of political parties
during strike or lock out.Ancillary functions: communication, welfare, education and
research.Chapter Ten International Industrial Relations 19
20. 20. 10.3 Trade Unions.Trade union structureCraft unions: these are horizontal
unions where workers of the same craft or category form into a union. The basic logic
behind the formation of such unions is that the workers belonging to the same craft do
face similar problems – mostly non managerial personnel form such unions. [Drivers’
Association or Signaling Staff Union in Railways].Most stable relationship, training
through apprenticeship, strong bargaining power due to their skills and high wages and
better benefits are some of the advantages of craft unions.Chapter Ten International
21. 21. 10.3 Trade Unions.Trade union structureCraft unions: Possibility of employer
playing one union against other and thereby breaking one of them, their irrelevance to
modern days of generality of service conditions of all classes of employees and failure to
cover a majority of workers of the company are disadvantages of craft unions.General
Unions: If the workers of any industry, any region and any job or occupation form into
one union in order to protect overall interests of the workers , such unions are called
“general unions.”Chapter Ten International Industrial Relations 21
22. 22. 10.3 Trade Unions.Trade union structureIndustrial unions: If the workers from
the different categories form into Union, that Union is called “Industrial Union.” These are
vertical unions. The logic behind formation of Industrial unions is that workers of the
same industry have the common bend and they are governed by same rules and
regulations and are administered by the same management. Importance of these unions
is increasing these days.Joint facility for collective bargaining, demand for uniformity in
the principle governing all aspects of service and working conditions; and scope for
coordination of different sections, levels and natures of industry are advantagesChapter
23. 23. 10.3 Trade Unions.Trade union structureFederation and Confederation:
Unions , either of the same industry or of different industries may form into association in
order to improve their unity and strength. Such union of unions is called Federation.
During critical situations, these federations without losing their individual identity may
resort to concerted action. For this purpose Federations form into an association and
such association is termed Confederation.International Federation: Federations at the
national levels join international federation in order to gather support at the international
level as well as to deal with HR issues of MNCs as operations of the MNCs are spread
over several countries.Chapter Ten International Industrial Relations 23
24. 24. 10.4 Concerns of Trade Unions in MNCs.The main concern of the trade
unions towards MNCs is the possibility of MNCs shifting their manufacturing and other
businesses to countries where the influence of trade unions is either zero or negligible.
Hence trade unions deal with MNCs very carefully.MNCs try to locate very crucial
operations that require very skilled human resource in their home country and locate
other businesses in countries where required human resource is available in plenty and
at low cost.Others practice home country human resource policies and procedures in all
their host country subsidiary operations.Both strategies reduce or eliminate bargaining
powers of the trade unions in the host countries.Chapter Ten International Industrial
Relations 24
25. 25. 10.4 Concerns of Trade Unions in MNCs.Influence of trade unions on HR
practices of MNCsTrade unions in MNCs influence decisions with regard to employment
of parent & third country nationals, salary and benefits ; and
promotions.Employment:MNCs in search for the best talent prefer employment of
expatriates whereas trade unions prefer appointment of host country nationals
particularly for senior management jobs. Trade unions influence host country
governments to enact laws for imposing the regulations and limits over the appointments
of all kinds of expatriates. Thus unions in developed countries oppose MNCs relocating
of jobs / business outsourcing.Chapter Ten International Industrial Relations 25
26. 26. 10.4 Concerns of Trade Unions in MNCs.Influence of trade unions on HR
practices of MNCsSalaries & benefits:Trade unions are concerned with two aspects in
respect of salaries and benefits viz. salary discrimination between expatriates and host
country nationals and enhancement of salary levels of all kinds of employees.These
pressures from unions to increase salaries of host country nationals at par with those of
expatriates, their demands for minimum salaries, maternity benefits, gratuity, pension,
accident benefits, occupational health benefits and medical benefits result in loss of
advantage of locating the operations in the host country.Chapter Ten International
27. 27. 10.4 Concerns of Trade Unions in MNCs.Influence of trade unions on
Business Practices of MNCsOptimum Size:Trade unions can limit the economies of
scale that MNCs can avail in the process of location, expansion diversification, mergers,
joint ventures and takeovers.Location & ShiftingMNCs prefer to locate various units in
different countries based on the availability of qualitative resources including human
resources at the least possible cost. Trade unions of MNCs oppose such shifts to other
countries as the move results in lost opportunities to workers in their country.Chapter
28. 28. 10.4 Concerns of Trade Unions in MNCs.Influence of trade unions on
Business Practices of MNCsClosure of units:MNCs prefer to close the units in some
countries where the human resource conditions and trade union influences are
unfavourable. But the trade unions lobby the national governments in order to enact
redundancy legislations & regulatory measures.In fact, some unions demand MNCs to
leave some countries.Thus trade unions influence the MNCs in their HR practices as
well as their business activities. MNCs in turn, in order to protect their interests formulate
and implement strategies to counter influence of trade unions.Chapter Ten International
29. 29. 10.4 Concerns of Trade Unions in MNCs.MNCs strategies to Counter Trade
Union Influences Offset the losses in one country with the profits earned in other
country. Alternate and dual sources simultaneously to have a back up facility in case any
problem crops up due to union intervention. Develop the ability to shift production
locations by restricting key activities in home country and establish subsidiaries in
developing countries for operations that require relatively lower level of skills.Chapter
30. 30. 10.4 Concerns of Trade Unions in MNCs.MNCs strategies to Counter Trade
Union Influences Development of diversified portfolios which reduces the concentrations
of trade unions control and enables the organizations to spread the risk of trade unions.
Development of superior knowledge in labor laws of the host country, skills of
negotiations with trade unions on salary, recruitment and other human resources.. MNCs
either stop investing additional funds or divest in order to make the plant less competitive
as well as non- economical , so that trade unions can’t be any more demand oriented
and stop threatening the MNCsChapter Ten International Industrial Relations 30
31. 31. 10.5 Collective NegotiationsCollective bargaining is a method by which trade
unions protect and improve the conditions of their members’ working lives.The main
characteristics of collective bargaining are –1. It is a group action as opposed to
individual action and is initiated through the representatives of workers.2. It is flexible
and mobile and not fixed or static.3. It is a two-party process.4. It is a continuous
process.5. It is industrial democracy at work.6. It is an art , an advanced form of human
relations.Chapter Ten International Industrial Relations 31
32. 32. 10.5 Collective NegotiationsImportance of collective bargaining -1. Increase
the economic strengths of unions and management.2. Establish uniform conditions of
employment.3. Secure a prompt and fair redressal of grievances4. Avoid interruptions in
work which follow strikes, go slow tactics and similar coercive activities.5. Lay down fair
rates of wages and norms of working conditions.Chapter Ten International Industrial
Relations 32
33. 33. 10.5 Collective NegotiationsImportance of collective bargaining -6. Achieve
an efficient operation of the plant.7. Promote the stability and prosperity of the industry.8.
It provides a method for the regulation of the conditions of employment of those who are
directly concerned about them.9. It provides a solution to the problem of sickness in the
industry and ensure old age pension benefits and other fringe benefits.Chapter Ten
34. 34. 10.5 Collective NegotiationsFunctions of collective bargaining -1) Increase
the economic strength of employees and management.2) Establish uniform conditions of
employment.3) Secure a prompt and fair redressal of grievances.4) Lay down fair rates
of wages and other norms of working conditions.5) Achieve an efficient functioning of of
the organization.6) Promote the stability and prosperity of the company.Chapter Ten
35. 35. 10.5 Collective NegotiationsFunctions of collective bargaining -7. It provides a
method of the regulation of the conditions of employment of those who are directly
concerned about them.8. It provides a solution to the problem of sickness of industry and
ensures old age pension benefits and other fringe benefits.9. It creates a new and varied
procedures for the solution of problems as and when they arise.10. It provides a flexible
means for adjustment of wages.11. It extends the democratic principle to industrial
field.12. It builds up a system of industrial jurisprudence.Chapter Ten International
36. 36. 10.6 Disputes / ConflictsIndustrial dispute means any dispute or difference
between employers and employers, employers and workers or between workmen and
workmen, which is connected with employment or non-employment or terms of
employment or with the condition of labour of any person.Causes of industrial disputes:
are many. Deep seated and more basic causes of disputes can be identified through in-
depth probe though surface manifestations appear to be responsible for conflicts. The
relative importance of the causes is very difficult to gauge.Causes of industrial disputes
can grouped as i] industrial factors; ii] management’s attitude towards workers; iii]
government machinery & iv] others.Chapter Ten International Industrial Relations 36
37. 37. 10.6 Disputes / ConflictsTypes of industrial conflicts: Strikes : are the result of
more fundamental maladjustments, injustices & economic disturbances. Strike is a
temporary cessation of work by a group of employees in order to express grievances or
to enforce a demand concerning change in working conditions.Primary strikes take the
form of ‘stay away strike’ , ‘stay-in or sit down strike’, ‘tools down, pen-down or mouth
shut strike’, ‘token or protest strike’, ‘lightening or wild cat strike’, ‘go slow’, ‘work to rule /
work to designation’, ‘picketing’, ‘boycott’ , ‘gherao’ and ‘hunger strike’.Secondary strikes
are against a third party. These strikes are sympathetic strikes. There are also other
strikes like general, particular, political or bandh.Chapter Ten International Industrial
Relations 37
38. 38. 10.6 Disputes / Conflicts The outcome of strikes is settlement of dispute in
favour of employees, loss of work, loss of employment, loss of earnings by employees,
inconveniences to customers, suppliers and market intermediaries.Lockouts: If the
employer has any difference with the employees and if such difference is not settled
through negotiations, employer may chose to close down the factory in order to force the
employees to settle the differences.Lock out means the action of an employer in
temporarily closing down or shutting down his undertaking or refusing to provide his
employees with work with the intention of forcing them either to accept demands made
by him or withdraw demands made by them or him.Chapter Ten International Industrial
Relations 38
39. 39. 10.6 Disputes / ConflictsPrevention of Industrial Conflicts:Methods to prevent
industrial disputes cover the entire field of relations between industry and labour and
include enactment and enforcement of progressive legislation, works committee &
councils, wage boards, trade boards, profit sharing and co-partnership, tripartite labour
machinery, education, housing, welfare work and all such measures which can bridge
the gap between the employers and the employed.Conciliation by bi- or tripartite
boards, formulation & issue of standing orders, installing effective grievance redressal
procedure, collective bargaining strong trade unions or allowing workers to participate in
management through co-partnership and profit sharing all contribute to prevention of
conflicts.Chapter Ten International Industrial Relations 39
40. 40. 10.6 Disputes / ConflictsSettlement of Conflicts:Investigation: is conducted by
a board or court appointed by the government. If it is conducted based on an application
from either or both the parties, then it is voluntary.Mediation: In this method an outsider
assists the parties to negotiate. The main aim of mediation is to bring about a settlement
of disputes through voluntary agreement between the two parties.Conciliation: the main
objective of conciliation or arbitration is to reunite the two conflicting parties in an
industry to avoid interruption in operations.Chapter Ten International Industrial Relations
40
41. 41. 10.6 Disputes / ConflictsSettlement of Conflicts:Voluntary Arbitration: If the
two parties fail to arrive at a mutually agreeable settlement by themselves then they
themselves or through a mediator agree to refer the dispute to arbitrator for resolution.
Here the award of the arbitrator has to be accepted by the two parties for
enforcement.Compulsory Arbitration / Adjudication: when the parties fail to arrive at any
settlement the court or the government may refer matter to compulsory arbitration or
adjudication where the award is binding on both the parties to the dispute.Chapter Ten
42. 42. 10.7 Quality Circles and Participative ManagementQuality circle is a small
group of employees in the same work area or doing similar type of work who voluntarily
meet regularly for about an hour every week to identify , analyze & resolve work related
problems not only to improve quality, productivity and total performance of the
organization but also to enrich quality of work life of employees.Participative
management is a system of communication and consultation either formal or informal by
which employees of an organization are kept informed about the affairs of the
undertaking or through which they express their opinions, idea, suggestions and
contribute to the development of alternative solutions, evaluate them and help the
management make decisions.Chapter Ten International Industrial Relations 42
43. 43. 10.7 Quality Circles and Participative Management The concept of
participative management , viewed from global perspective, began with the
establishment of joint committees of workers in several European countries after the end
of the world War I.The schemes of participation have assumed a variety of forms and
structures in different countries. This was due the different political set up, governmental
goals and values, economic and industrial structure and the aspects of socio-political
culture of a particular country.United Kingdom:The idea of workers participation began
with the industrialization and was a product of socialistic thought and humanitarian
attitude of some employers.Chapter Ten International Industrial Relations 43
44. 44. 10.7 Quality Circles and Participative ManagementUnited Kingdom:Joint
councils were formed to discuss issues related mainly to health, welfare and safety of
workers. Both the parties lost interest as the councils did not have any administrative
powers. Collective bargaining in the UK is essentially a decision making process
between the management and the trade unions. But the exercise is conducted with
intensive power struggle, mistrust and negative pressure tactics. Hence both collective
bargaining and participative management are not successful in the UK.Chapter Ten
45. 45. 10.7 Quality Circles and Participative ManagementGermany:Works Councils
were there in Germany even before the world War I, but they were suppressed by the
Nazis to revive after the War. Unions play a major role in collective bargaining at
Industry level. Works Councils are not supposed to enter the area of collective
bargaining, but they have gradually enlarged their operations and are encroached on
areas of collective bargaining in practice.Yugoslavia:The Yugoslavian system has a
system of self management distinct from workers’ participation in management. The self
management gives workers complete control.Chapter Ten International Industrial
Relations 45
46. 46. 10.7 Quality Circles and Participative ManagementYugoslavia:They can
manage directly all aspects of industries through their representatives. The important
bodies under self management are Workers’ Councils which is the highest authority at
an enterprise level; the management Board which is executive organ of the Council; the
Director who is the at the apex level and responsible to execute decisions of the Council
& the Board.Then there is a People’s Committee comprising of locals and it has an
advisory role in the appointment of Director and providing funds for investment and
payment of wages. In practice workers are more concerned with day to day affairs &
place faith in the system & enterprise.Chapter Ten International Industrial Relations 46
47. 47. 10.7 Quality Circles and Participative ManagementUSA:Collective bargaining
is much widely used in the USA as the chief means of for industrial democracy. US
enterprises develop cooperation which takes the form of joint management committees.,
production committees etc. Profit sharing schemes as per Scanlon plan have become
another means of fostering cooperation between workers and management.Collective
bargaining is the most effective way in which workers through their trade unions
influence managerial decision-making. Most of the workers and their unions are not
interested in formal participation in management.Chapter Ten International Industrial
Relations 47
48. 48. 10.8 Summary Industrial relations deals with the relations among employees,
employer, trade unions and government. International Industrial Relations deals with the
complex relationships among employers employing foreign nationals , employees of
different nationalities, home and host country governments and trade unions of the
organizations operating in various countries and their national and international
federations. Three actors of industrial relations: Workers and their organizations,
employers and their organizations and governments. Trade union is an association of
mostly employees.Chapter Ten International Industrial Relations 48
49. 49. 10.8 Summary Functions of trade unions : Militant [protect workers’ interests],
Fraternal [ assistance during strikes], Social [ social activities], Political [ political
activities] and ancillary [communication, research, publications]. Trade union structure
includes Craft Union, General Unions, Industrial Unions, Federations and international
Federations Trade unions influence MNCs’ HRM practices, Employment, Relocation of
jobs/outsourcing and salaries & benefits. Trade unions influence MNCs’ business
practices, optimum size, location and shifting & closure of units.Chapter Ten
50. 50. 10.8 Summary MNCs’ strategies to counter trade unions’ influence: Offset the
losses in one country with the profits earned in other country, alternate / dual sources,
develop the ability to shift production locations, development of diversified port folios and
development superior knowledge. Collective bargaining is a process of discussion and
negotiation between two parties viz. employer & trade union. Industrial dispute means
any dispute or difference between employees and employer.Chapter Ten International
51. 51. 10.8 Summary Quality circle is a small group of employees in the same work
area or doing similar type of work formed to identify , analyze and resolve work related
problems not only to improve quality, productivity and total performance of the
organization but also to enrich quality of work life of employees. Participative
management is to encourage and allow employees to take part in decision making and
decision implementation.Chapter Ten International Industrial Relations 51
HRM Practices in India and Other Nations
Human Resource is the most important asset for any organisation and it is the source of achieving
competitive advantage. Managing human resources is very challenging as compared to managing
technology or capital and for its effective management, organisation requires effective HRM system.
HRM system should be backed up by sound HRM practices. HRM practices refer to organisational
activities directed at managing the pool of human resources and ensuring that the resources are
employed towards the fulfilment of organisational goals.
14.3.1 Human Resource Practices in India

Indian managers are more responsive to the human and bureaucratic consequences of their actions.
They are more influenced by positions and approaches which utilise philosophical and moral
justifications. They are more responsive to internal reward and controls. Because India has a larger
proportion of moralistic managers, change in managers is likely to be slower and more difficult.
Indian managers, at both middle and senior levels in organisations, possesses a belief in group-
based, participative decision-making, but have little faith in the capacity of workers for taking
initiative and responsibility. Indian managers favour labour and government intervention in the
affairs of the organisation. Middle-level managers in India espouse a greaterbelief in change and are
less conservative. In Indian culture, handshakes are acceptable but the most prevalent way of
greeting is by putting both the palms together in front of the chest (namaste). Back slapping and
touching arenot accepted at all. Indians are very tolerant of outsiders and acknowledge that there
are Notes unfamiliarity of local customs and procedures among them. HRD practices in Indian
companies attempt to blend Western and Eastern ideas and systems of people management. This
concept of HRD attempts to be more comprehensive and meaningful. For foreign firms, part of the
attraction has been the low cost of Indian labour. However, the competitiveness of India in terms of
the availability, qualifications, and skills of its human resources is considered to be one of the lowest
in the world. Example: The Indian software industry is highly competitive – Indian firms do not just
compete on price, but on the basis of quality, innovation, and technical expertise, and draw on a
huge pool of relatively low-cost, technically-qualified, English-speaking software professionals. In
1996, 104 firms out of the Fortune 500 outsource their software development to India. About 10% of
Microsoft’s 20,000 worldwide workforces are Indian. HRD places a premium on the dignity and
respect of people and is based on a belief in the limitless potential of human beings. It stresses that
people should not be treated as mere cogs in the wheel of production, but with respect. Did u
know? In a recent survey of Indian CEO’s, it was suggested that Indian managerial leaders were less
dependent on their personal charisma, but they emphasised logical and step by step implementation
processes. Indian leaders focused on empowerment and accountability in cases of critical
turnaround challenges, innovative challenges, innovative technology, product planning and
marketing or when other similar challenges were encountered (Spencer, Rajah, Narayan, Mohan &
Latiri 2007). 14.3.2 Human Resource Practices in U.S.A. Most people in the United States work in the
service sector, which accounts for 73% of all civilian employees, with only 24% in the manufacturing
and transportation sectors and less than 3% in agriculture. The American workplace is undergoing
radical changes in response to greater domestic and global competition, including work systems
innovations that are designed to increase productivity, reduce costs and improve quality. New
human resource practices are being implemented in work process design, employee stock
ownership, outsourcing and contingent employment. The identification of competencies required to
do a particular job (such as finance manager in the motor industry), has become central to the way
American companies recruit, appraise, train, reward and promote managers. This is apparent at
industry level in the UK Management Charter Initiative that charts managers’ competencies in terms
of key purpose (organisational objective), key role (managing people, managing finance, etc.), and
units of competence, elements of competence, and performance criteria and range indicators.
Hence a key purpose such as “to achieve the organisation’s objectives and continuously improve its
performance” will be traced down to the individual’s behavioral level, and performance will be
judged on prescribed criteria. Individuals can also be trained in these competencies where they have
a deficiency. Thus selection, appraisal, reward, promotion and training systems can be lined into
human resource management systems aimed at the achievement of organisational goals. American
managers are very individualistic and they value individual rewards and decision over group
performance. They have relatively low power distance. They are not upset when others have more
powers than they do. They are taught that everyone is equal, so they are not impressed by the
important jobs/titles. They are optimistic about the people’s motivation and capacities. Americans
believe that man has power to control nature and spend huge amount on space research, biotech,
etc. they believe that self-identification is achieved through action and performance. They are low-
context cultured society and ignore the non-verbal behaviour. For the American managers, the
single most important criteria are to have a successful career is ambition, drive and a pragmatic
individualistic achievement-oriented assessment system.
14.3.3 Human Resource Practices in Japan

Human practices in Japan are characterised by lifetime employment and seniority-based pay and
promotion. Japanese places a high stress on the security of the job as the basic social factor.
Employees have largely been recruited from school levels or university graduates, rather than
experienced workers trained by other companies. They are started at a lower level of pay. Their
induction programme and training is designed to encourage them to conform, as well as developing
skills. Regular pay increases and career advancement are provided on the basis of age and increases
and career advancement are provided on the basis of age and length of service to the company.
Unions based on the enterprises and comprising all employees in the company regardless of job or
occupation have been the dominant form of trade union and reflect the principles of loyalty, the
corporate family and obedience. They are involved in wage bargaining and resolving workplace
problems.
Japanese system of human resource management reflects these principles and provides a more
Notes systematic appreciation of the connections between the various factors involved; strategies to
internalise the labour market are based on the environment factors of relative stability including an
ageing workforce as well as technological innovation. The main features of the Japanese Human
Resource management are community orientation, seniority-based promotion and salary system,
class egalitarianism groupism, information sharing and employee participation, employment security
and flexible job behaviour. Factors that are transferable to overseas subsidiaries are: community
orientation, class egalitarianism, job security, and worker participation. Factors that are difficult to
transfer are: group-orientation behaviour, wage and promotion seniority system. Japanese are more
anxiety-prone and have a high job stress. Employees place high premium on job security, career
planning, and health insurance and retirement beliefs. They are more entrepreneurial, innovative
and exhibit less emotional resistance to change. Japan has a high muscularity index and so it places a
great importance on earnings, recognitions and challenges. They have a good orientation towards
human nature. They focus on self-control. They follow an indirect style of communication and
agreements between the members tend to be spoken rather than written. Japanese methods and
principles of people management focus on gaining mutual commitment of people and the
corporation. The corporation is seen as a family that looks after its own. Motivation should be seen
within the whole context of mutual loyalty and commitment. The way performance is both
conceived and rewarded in western organisations by performancerelated rewards, payment by
seniority in Japanese organisations is valued as a way of rewarding commitment to the corporation.
Japanese managers are highly pragmatic, lay strong emphasis on growth and size. They value
competence, achievement, dedication and loyalty.
International Industrial Relations

Introduction:
It is difficult to compare industrial relations systems and behaviour across national boundaries; a
labour relations concept may change considerably when translated from one industrial relations
context to another. The concept of collective bargaining in the United States means negotiations
between a labour union local and management; in Sweden and Germany it refers to negotiations
between an employers’ organisation and a trade union at the industry level. Cross-national
differences also emerge as to the objectives of the collective bargaining process and the
enforceability of collective agreements. Human resource management practices result in creation of
relations among employees, management and trade unions. Such relations are called industrial
relations. Similarly the HRM policies and practices of international business with regard to different
country nationals (PCN, TCN and HCN) result in relations among management of multinational
corporations and other kind of employees. Such relations are called international industrial relations.
These relations play a crucial role in strategy formulation and implementation in international
business either by enabling or disabling MNCs in the process of doing business in various countries.
10.1 Trade Unions and International Industrial Relations Before moving to trade unions and
International industrial relations, let us first the basics of industrial relations. ILO defines industrial
relations, “Industrial relations deal with either the relationship between the state and employers’
and workers’ organisations or the relation between the occupational organisations themselves”.
International industrial relations deals with the complex relationships among employers employing
foreign national, employees of different nationalities, home and host country governments and
trade unions of the organisations operating in various countries and their national and international
federations. 10.1.1 Factors that Influence Industrial Relations Factors influencing the industrial
relations are as follows: (i) Institutional factors: Home and host country government policy, labour
legislation, voluntary courts, collective agreement, employee courts, employers’ federations, social
institutions like community, caste, creed, system of power status etc. in various countries form
Institutional factors. (ii) Economic factors: Include economic organisation, like capitalist, communist,
mixed etc. , the structure of labour force, demand for and supply of labour force etc. (iii)
Technological factors: Include mechanisation, automation, rationalisation, computerisation,
information technology etc. (iv) Social and Cultural factors: Include population, religion, customs and
traditions of people, ethnic groups, cultures of various groups of culture etc. (v) Political factors:
Include political system in the country, political parties and their ideologies, their growth,
involvement in trade unions etc. (vi) Governmental factors: Include host and home country
governmental policies like globalisation policies, industrial policy, economic policy, labour policy,
export policy, migration and immigration policies etc. Example: Globalisation policies in countries
like Bulgaria brought dramatic changes in MNCs in that country. Early involvement of Trade Unions is
advised when MNCs plan to take over earlier Public enterprises where there is a tradition of trade
unions. 10.1.2 Actors of Industrial Relations Industrial societies necessarily create industrial relations
defined as the complex of interrelations among workers, management and the government. Three
major participants or factors of industrial relations, thus, are workers and their organisations,
management and the government. 1. Workers and their organisations: The total worker plays an
important role in industrial relations. The total worker includes working age, educational and family
background, psychological factors, social background, culture, skills, attitude towards others’ work
etc. Workers’ organisations, prominently known as trade unions, play major role in industrial
relations. The main purpose of trade unions is to protect the workers’ economic interests through
collective bargaining and by bringing pressure on the management through economic and political
tactics. Trade union factors include leadership, finances, activities etc
2. Employers and their organisations: Employers employ expatriates, pay salaries and various Notes
allowances, provide a variety of benefits, regulate the working relations through various policies,
rules and regulations and by enforcing labour laws of the country. They expect workers to follow
rules and regulations, contribute their resources to the maximum to achieve organisational goals
and mission. The difference between demands of the workers and employers results in industrial
conflict. Normally employers’ power is higher than that of their workers. But their power is
undermined when compared to that of trade unions. Employers form their organisations to equate
(or excel) their bargaining power with that of the trade unions. These organisations protect the
interest of the employer by pressurising the trade union and the government. 3. Government:
Government plays a balancing role as a custodian of the nation. Government exerts its influence on
industrial relations through its labour policy, industrial relations policy, implementing labour laws,
the process of conciliation adjudication by playing the role of a mediator etc. It tries to regulate the
activities and behaviour of both employees’ and employers’ organisations, individual and group
organisations. Definition of Trade Union A trade union is a continuing long term association of
employees, formed and maintained for the specific purpose of advancing and protecting the
interests of the members in their working relationship. Some argue that it also covers employers’
organisations and friendly societies. 10.1.3 Factors for Differences in Trade Unions Structure Several
factors are identified that may underlie the historical differences in the structure of the trade unions
in various countries: 1. The mode of technology and industrial organisation at critical stages of union
development; 2. Methods of union regulation by government; 3. Ideological divisions within the
trade union movement; 4. The influence of religious organisations on trade union development; and
5. Managerial strategies for labour relations in large corporations. Table 10.1: Trade Union Structure
in Western Societies Australia general, craft, industrial, white-collar Belgium industrial, professional,
religious, public sector Canada industrial, craft, conglomerate Denmark general, craft, white-collar
Finland industrial, white-collar, professional and technical Germany industrial, white-collar Great
Britain general, craft, industrial, white-collar, public sector Japan enterprise The Netherlands
religious, conglomerate, white-collar Norway industrial, craft Sweden industrial, craft, white-collar
and professional Switzerland industrial, craft, religious, white-collar United States Industrial, craft,
conglomerate, white-collar Source: Industrial Relations: Origin and Development (1986) p. 79 182
LOVELY PROFESSIONAL UNIVERSITY Global HRM Notes Union structures differ considerably among
Western countries. These include industrial unions, which represent all grades of employees in an
industry; craft unions, which are based on skilled occupational grouping across industries;
conglomerate unions, which represent members in more than one industry; and general unions,
which are open to almost all employees in a given country. Enterprise unions are common in Asia-
Pacific nations, although there are national variations in their functions, and in the proportion of
enterprise unions to total unions. The lack of familiarity of multinational managers with local
industrial and political conditions has sometimes needlessly worsened a conflict that a local firm
would have been likely to resolve. Multinationals are recognising this shortcoming and admitting
that industrial relations policies must be flexible enough to adapt to local requirements. ! Caution
Trade unions limit the strategic choices of multinationals in three ways: 1. By influencing wage levels
to the extent that cost structures may become uncompetitive. 2. By constraining the ability of
multinationals to vary employment levels at will. 3. By hindering or preventing global integration of
the operations of multinationals. Let us explore in detail, how trade union limits on MNC’s strategic
choices: 1. Influencing Wage Levels: Although the importance of labour costs relative to other costs
is decreasing, labour costs still play an important part in determining cost competitiveness in most
industries. The influence of unions on wage levels is important. Multinationals that fail to
successfully manage their wage levels will suffer labour cost disadvantages that may narrow their
strategic options. 2. Constraining the Ability of MNCs to Vary Employment Levels at Will: For many
MNCs operating in Western Europe, Japan, and Australia, the inability to vary employment levels at
will is more serious problem than wage levels. Many countries now have legislation that limits
considerably the ability of firms to carry out plant closure, redundancy, or layoff programmes unless
it can be shown that structural conditions make these employment losses unavoidable. Plant closure
or redundancy legislation in many countries also frequently specifies that firms must compensate
redundant employees through specified formulae such as two weeks’ pay for each year of service. In
many countries, payments for involuntary terminations are rather substantial, especially in
comparison to those in the United States. Unions influence this process in following two ways: (a) By
lobbying their own national governments to introduce redundancy legislation, (b) By encouraging
regulation of MNCs by international organisations such as the Organisation for Economic
Cooperation and Development (OECD). Multinational managers who do not take these restrictions
into account in their strategic planning may well find their options severely limited. 3. Preventing
Global Integration of MNC Operations: MNCs make a conscious decision not to integrate and
rationalise their operations to the most efficient degree because to do so could cause industrial and
political problems. LOVELY PROFESSIONAL UNIVERSITY 183 Unit 10: International Industrial Relations
Notes Example: General Motors is an example of this “sub-optimising of integration.” GM was
alleged in the early 1980s to have undertaken substantial investments in Germany (matching its new
investments in Austria and Spain) at the demand of the German metalworkers’ union (one of the
largest industrial unions in the Western world) in order to foster good industrial relations in
Germany. Union influence delays the rationalisation and integration of MNCs’ manufacturing
networks and increases the cost of such adjustments. But in automobiles industries at least, it
permanently reduces the efficiency of the integrated MNC network. Therefore, treating industrial
relations as incidental and relegating them to the specialists in various countries, is inappropriate. In
the same way as government policies need to be integrated into strategic choices, so do industrial
relations.
10.2 Key Issues in International Industrial Relations Because national differences in economic,
political, and legal systems, there are different industrial relations systems across countries, so,
MNCs delegate the management of industrial relations to their foreign subsidiaries. A policy of
decentralisation does not keep corporate headquarters from exercising some coordination over
Industrial relations strategy. Corporate headquarters will become involved in or oversee labour
agreements made by foreign subsidiaries because these agreements may affect the international
plans of the firm and/or create precedents for negotiations in other countries. Example: The U.S.
firms are less to recognise trade unions, preferred not to join employers associations, had more
highly developed and specialised personnel departments at plant level, and tended to pay higher
wages and offer more generous employee fringe benefits than local firms. 184 LOVELY
PROFESSIONAL UNIVERSITY Global HRM Notes Multinational headquarters involvement in industrial
relations is influenced by several factors as detailed below: 1. The Degree of Inter-subsidiary
Production Integration: A high degree of integration was found to be the most important factor
leading to the centralisation of the Industrial relations function within the firms. Industrial relations
throughout a system become of direct importance to corporate headquarters when transnational
sourcing patterns have been developed; that is, when a subsidiary in one country relies on another
foreign subsidiary as a source of components or as a user of its output. A coordinated industrial
relations policy is one of the key factors in a successful global production strategy. 2. Nationality of
Ownership of the Subsidiary: There are differences between European and U.S. firms in terms of
headquarters involvement in industrial relations. U.S. firms tend to exercise greater centralised
control over industrial relations than do British or other European firms. U.S. firms tend to place
greater emphasis on formal management controls and a close reporting system to ensure that
planning targets are met. The foreign-owned multinationals in Britain prefer single-employer
bargaining and are more likely to assert managerial prerogative on matters of labour utilisation. U.S.
– owned subsidiaries to be much more centralised in industrial relations decision-making than
British-owned. This is due to the more integrated nature of U.S. firms and the more ethnocentric
managerial style of U.S. firms. 3. International Human Resource Management Approach: The various
international human resource management approaches utilised by multinationals have implications
for international labour relations. An ethnocentric predisposition is more likely to be associated with
various forms of industrial relations conflict. A geocentric firm will bear more influence on host-
country industrial relations systems, due to their greater propensity to participate in local events. 4.
MNC Prior Experience in Industrial Relations: European firms have tended to deal with labour unions
at industry level rather than at firm level. The opposite is more typical for U.S. firms. In the United
States, employer associations have not played a key role in industrial relations system and firm-
based industrial relations policies are the norm. 5. Subsidiary Characteristics: A number of subsidiary
characteristics to be relevant to centralisation of industrial relations: (a) Subsidiaries that are formed
through acquisition of well established indigenous firms tend to be given much more autonomy over
industrial relations than are greenfield sites set up by a multinational firm. (b) Greater intervention
would be expected when the subsidiary is of key strategic importance to the firm and the subsidiary
is young. (c) Where the parent firm is a significant source of operation or investment funds for the
subsidiary, that is, where the subsidiary is more dependent on headquarters for resources, there will
tend to be increased corporate involvement in industrial relations and human resource
management. (d) Poor subsidiary performance tends to be accompanied by increased corporate
involvement in industrial relations. Where poor performance is due to industrial relations problems,
multinationals tend to attempt to introduce parent-country industrial relations practices aimed at
reducing industrial unrest or increasing productivity
6. Characteristics of the Home Product Market: An important factor is the extent of the home Notes
product market. If domestic sales are large relative to overseas operations, it is more likely that
overseas operations will be regarded by the parent firm as an extension of domestic operations. Lack
of a large home market is a strong incentive to adapt to hostcountry institutions and norms. Since
the implementation of the Single European Market in 1993, there has been growth in large
European-scale companies that centralise management organisation and strategic decision-making.
7. Management Attitudes towards Unions: Knowledge of management attitudes concerning unions
may provide a more complete explanation of multinational industrial relations behaviour than could
be obtained by relying solely on a rational economic model. Thus, management attitudes should also
be considered in any explanation of managerial behaviour along with such factors as market forces
and strategic choices. This is of particular relevance to U.S. firms, since union avoidance appears to
be deeply rooted in the value systems of American managers. Worldwide trade union membership
has fallen over the past decade due to economic factors such as reduced public sector employment,
reduced employment in manufacturing industries as a share in total employment, and increased
competition. It is also associated with decentralisation of industrial relations to business unit level,
changes in governance, and legislative changes. Example: The sharpest drop in union density (almost
36% over the past decade) has been in central and eastern Europe, and may be explained by political
and economic changes associated with the dissolution of the Soviet bloc and the end of compulsory
union membership. Union membership decline is also linked to the introduction of new forms of
work organisation, globalisation of production, and changes in workforce structure. Industrial
disputes is the another key issue in international industrial relations. Strike-proneness was measured
via three variables – strike frequency, strike size, and strike duration. There was no difference across
the two groups of firms with regard to strike frequency, but multinational subsidiaries did
experience larger and longer strikes than local firms. This difference indicates that foreign-owned
firms may be under less financial pressure to settle a strike quickly than local firms – possibly
because they can switch production out of the country. International industrial relations are
influenced by a broad range of factors. General statements cannot be applied to the organisation of
the industrial relations function within MNCs. Rather, different MNCs adopt different industrial
relations strategies in relation to the environmental factors peculiar to each firm.
10.3.1 Regional Integration Regional integration is a process in which states enter into a regional
agreement in order to enhance regional cooperation through regional institutions and rules.
Regional integration is association of states based upon location in a given geographical area, for the
safeguarding or promotion of the participants, an association whose terms are fixed by a treaty or
other arrangements. It is a worldwide phenomenon of territorial systems that increase the
interactions between their components and create new forms of organisation, co-existing with
traditional forms of state-led organisation at the national level. It is the joining of individual states
within a region into a larger whole. The degree of integration depends upon the willingness and
commitment of independent sovereign states to share their sovereignty. Its objectives could range
from economic to political although it has become a political economy initiative where commercial
purposes are the means to achieve broader socio-political and security objectives. Regional
integration have often focused on removing barriers to free trade in the region, increasing the free
movement of people, labour, goods, and capital across national borders, reducing the possibility of
regional armed conflict. Regional integration initiatives should fulfil following important functions: 1.
the strengthening of trade integration in the region 2. the creation of an appropriate enabling
environment for private sector development 3. the development of infrastructure programmes in
support of economic growth and regional integration 4. the development of strong public sector
institutions and good governance 5. the reduction of social exclusion and the development of an
inclusive civil society 6. contribution to peace and security in the region 7. the building of
environment programmes at the regional level 8. The strengthening of the region’s interaction with
other regions of the world European Union (EU): Regional integration such as the development of
the European Union (EU) has brought significant implications for international industrial relations. In
the Treaty of 190 LOVELY PROFESSIONAL UNIVERSITY Global HRM Notes Rome (1957), some
consideration was given to social policy issues related to the creation of the European Community. In
the EU, the terms social policy or social dimension, are used to cover a number of issues including
labour law and working conditions, aspects of employment and vocational training, and social
security. The Social Charter of the Council of Europe came into effect in 1965. In 1987, the major
objective of the implementation of the Single European Act was to establish the Single European
Market (SEM) on December 31, 1992, in order to enhance the free movement of goods, money, and
people within the SEM. The social dimension aims to achieve a large labour market by eliminating
the barriers that restrict the freedom of movement and the right of domicile within the SEM. The
European Community Charter of the Fundamental Social Rights of Workers (often referred to simply
as the Social Charter) was introduced in 1989, and has guided the development of social policy in the
1990s (EC, 1990). The Social Chapter in the Treaty of Amsterdam opens with a general statement of
objectives. It then sets out the objectives for the E.U.: to support and complement the activities of
the Member States in a number of listed areas. These include improvement of working conditions
and of the working environment in the interests of workers, integration of persons excluded from
the labour market, and equality of opportunity, and at work, between men and women. However,
the Treaty excludes matters of pay, the right of association, and the right to strike or to lock out. The
European Commission department responsible for social policy is known as DirectorateGeneral V
(often abbreviated to ‘DG V’).
North American Free Trade Agreement (NAFTA): NAFTA is an agreement which involves the
formation of a free trade zone between the United States, Canada and Mexico. The Canada– United
States Free Trade Agreement went into effect on January 1989, and a draft accord to create NAFTA,
which brought Mexico into the trading bloc, was announced in August 1992. The NAFTA agreement
was signed by the governments of the United States, Mexico, and Canada in December 1992, coming
into force in January 1994. NAFTA differs from the Single European Market in that it is a free trade
zone and not a common market. NAFTA deals only with the flow of goods, services, and investments
among the three trading partners. It does not address labour mobility or other common policies of
the SEM. It has introduced new institutions to process complaints, violations of labour laws, and
committed each of the three nations to introduce a set of 11 labour rights principles. There are
significant HR implications in NAFTA that must be considered by HR managers in North American
firms. While NAFTA does not include workplace laws and their enforcement, the country with the
least restrictive workplace laws will have a competitive advantage. Organised labour in the United
States and Canada responded to the passage of NAFTA with substantial opposition, based on fear of
job losses due to the transfer of production to Mexico to take advantage of lower wage rates and tax
enforcement of social and labour legislation. In the case of NAFTA, jobs are able to cross borders, but
workers are not. There has been – a general lack of coordination between the labour organisations
of the NAFTA countries. Example: In telecommunications, trucking, and electrical industries, NAFTA
has stimulated some strategic cross-border collaboration among individual trade unions and their
allies. The EU and NAFTA provide examples of regional integration, which present many issues for
international industrial relations. As regional integration, and interregional integration, develops in
other parts of the world, issues will continue to emerge for international industrial relations.

Hofstede's Cultural Dimensions: Power Distance

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Hofstede’s Cultural Dimensions

June 17, 2017 Administrator 2 Comments Collectivism, Cross Cultural

Figure 1: Hofstede’s Cultural Dimensions

Figure 2: Hofstede’s Cultural Dimensions Framework

Hofstede's Cultural Dimensions

The Different Types of Hofstede's Dimensions

What Do These Mean?

Hofstede's Cultural Dimensions

The Different Types of Hofstede's Dimensions

What Do These Mean?

 The use of jargon. Over-complicated, unfamiliar and/or technical terms.

Think of movie scenarios in which someone yells clipped phrases at a person

Examples Of Perceptual Barriers

 Perceptual Filters - We all have our own preferences, values,

Overcoming Perceptual Barriers

 The audience may make assumptions about you or the situation;

 Effective communication relies on being aware of nonverbal aspects of

Examples Of Cultural Barriers

 Generational - Each age group has a different general approach to

Japanese managers (when compared to American managers)

Japanese managers, more than American managers, have

Japanese people endorse social norms whereby uncertainty is

Conclusions and Implications:

In Japan, Theory Z practices are consistent with the general

American management has not found an internally consistent

The theory Z as given by Professor William Ouchi simply

Japanese organizations foster life time employment, slow

14.3.1 Human Resource Practices in India

14.3.3 Human Resource Practices in Japan

International Industrial Relations

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