Industrial Relations

Evolution of Industrial Relations

• Segmentation (Blue- Collar & White-Collar roles)
 Mass scale production required repetitive tasks to be
performed with greater efficiency and competence
 Work fragmented into smaller tasks
• Specialization (Horizontal differentiation)
• Hierarchical levels (Vertical differentiation)
• A new relationship interface focusing on the
technological transformation and innovations leading
towards collective effort for protecting the employees
interests
• The changes in the work place relationships include:
• Increase in the capital-labor ratio
• Work specialization
• Fragmentation of work
• Repetitive work to increase efficiency
• Fragmentation of work led to formation of groups, employees
and employers
• New perspective of inter-group relationship
• Growing sense of insecurity required for collective effort to
counter any management initiative such as retrenchment,
dismissal etc
 Defining Industrial Relations
• According to Merriam-Webster dictionary industrial
relations is defined as “the dealings or relationships
of a usually large business or industrial enterprise
with its own workers, with labor in general, with
governmental agencies or with the public”.
• The Encyclopedia Britannica has defined industrial
relations as “the study of human behavior in the
workplace, focusing especially on the influence such
relations have on an organizations productivity”.
• Industrial relations originally implied employer-
employee relations
• When trade unions started espousing the cause
of workers, their activities also came to be
included in the scope of industrial relations
• The state stepped in regulating the relationship
for Public interest and social welfare, theses
activities too got included within the ambit of
industrial relations
• IR is the study of relationships between employers and
employees
• At an organization level or national level
• States role
• Societal, economic, political and technological forces as context
• It includes: Players and their objectives
• Structures
• Conflicts (origins and resolutions)
• Contexts and their impact
• Processes and their outcomes
 Objectives of IR
• Development and promotion of harmonious labor-management
relations
• Maintenance of industrial peace and avoidance of industrial drift
and conflicts. Also safeguarding interest of labor, management,
industry and national economy as a whole
• Establish industrial democracy based on participatory partnership
• To raise the level of productivity
• To boost the discipline and morale of workers
• To increase industrial prosperity
• To make the workers improve their problem viewing and solving
skills through mutual negotiations and consultation with the
management
 Significance of IR
• Help in the economic progress of the country
• Essential to help establish and maintain true industrial
democracy which is prerequisite for the establishment of a
socialist society
• Help management formulate and implement i.e. putting
labor relation policies into action
• Encourage collective bargaining as means of self-regulation
• Assisting government in making laws forbidding unfair
practices of unions and employers
• Help build and boost the discipline and morale of workers
 Key Stakeholders
1. In the organization:
• Employers
• Employees
2. In the operating environment
• Trade unions
• Employer association
• In the macro-environment
• Peak union bodies
• Peak employer bodies
4. Government and regulating bodies
 Essential Features of IR
• IR arise out of an employment relationship
• The IR system sets complex rules and regulations for the
participants (i.e. the employers, workers, State )
• The relationship hinges on a cooperative spirit between all
partners thereby emphasizing the need for adjustment and
accommodation in the interest of growth and development
• State intervention to prevent and control industrial
conflicts and distortions in socio-economic order through
enactment of labor laws and creating structures and
institutions to resolve them
 Conditions For Good IR
• Past record of IR
• Satisfaction of economic needs of workers
• Social and psychological needs of workers
• Off-the –job conditions of the workers
• Strong and enlightened labor unions
• Negotiation skills and attitudes of workers and
management
• Public policy and Legislation
• Education, training and development of workers
• Inter-personal relations
 Causes of Poor IR
• Nature of work (wages)
• Political nature of labor unions
• Level of wages
• Occupational instability
• Unhealthy behavioral climate
• Unfair practices
• Outdated and outmoded laws
 Effect of Poor IR
• Multiplier effect
• Resistance to change
• Declines in normal working
• Frustration and social cost
 Current Issues in IR
• Minimum wages
• Flexible/Performance pay
• Cross-cultural management
• Dispute prevention
• Industrial relations/HRM training
• Balancing inefficiency with equity and labor market flexibility
• Freedom of association, labor rights and changing patterns of work
• Women
• Migration
• HRM
• Transition economies
 Suggestions to Improve IR
• Constructive attitudes
• Policies and procedures
• Mutual trust and confidence
• Right kind of union leadership
• Administration of collective bargaining
agreement
• Originally IR dealt with union-management
issues like labor disputes, trade unions,
collective bargaining etc whereas today IR is
considered as an effective instrument for
associating employers and workers with the
formulation and implementation of
development policies
 IR in Nepal
• Industrialization the basis of IR is comparatively a new
concept in Nepal
• Industrialization started with Biratnagar Jute mill in
1936 and marked the beginning of the organized
industry in the country
• With the rise of industry the problem of IR also gained
prominence
• The IR phenomenon still remains to be unveiled and
understood due to lack of research and multi-
dimensional aspects of IR
 Present Status of IR
• The climate of IR is the result of the interaction between the
economic, political, technological and socio-psychological
factors
• The Industrial workers:
• Most of them rural migrants
• Mainly came from agricultural background
• Mostly the skilled and highly skilled from other countries origin
• Workers retained their family ties and visited their native places
thrice a year
• The contractual nature of employment inhibited the creation of
permanent jobs
 Three Major Actors
• Workers (represented by the trade unions)
• Employer’s (represented by the employer’s
association)
• The society itself (represented by the the
governments)
• Harmonizing or managing the sectorial
divergent or even conflicting interests of these
three actors is essential
 What is Employee Relations?
• ‘Employee relations’ is a term that has become
commonly used only in relatively recent years
• Prior to this it is likely that you would have
found the term ‘industrial relations’ in more
common use
• Employee relations refer to the relationship
shared among the employees in an
organization.
• Healthy relation among the employees goes a
long way in motivating the employees and
increasing their confidence and morale
• An employee must try his level best to adjust
with each other and compromise to his best
extent possible.
• Employee relations, known historically as industrial relations, is
concerned with the contractual, emotional, physical and
practical relationship between employer and employee.
• The term employee relations is increasingly used due to
recognition of the fact that much of the relationship is actually
non-industrial. Some authors cite employee relations as dealing
only with non-unionised employees and labour or industrial
relations with unionised employees.
• Others suggest that industrial relations and employee relations
are dead fields, replaced by the more all-encompassing.
• Employee relations refers to the total relationship between an
employer (and their representatives) and the employee (and
their representatives) in regard to the establishment of
conditions of employment.
• In the past, the term ‘industrial relations’ has been used to
describe this relationship; however, this has largely been
replaced by the broader term ‘workplace relations’.
• Industrial relations usually refers to the resolution of conflict
between employers and employees, while employee relations
is an approach that incorporates all the issues in the
employer–employee relationship in the workplace, including
recruitment, equal opportunity, training and development,
and organizational structure.
• Blyton and Turnbull (1994: 7–9) discuss why they have chosen to use the term
‘employee’ as opposed to ‘industrial’
• They point out that industrial relations:
• Became inevitably associated with trade unions, collective bargaining and industrial
action
• Had too strong a tendency to view the world of work as synonymous with the heavy
extractive and manufacturing sectors of employment, sectors which were dominated
by male manual workers working full-time and which are in decline in nearly all
developed economies.
• Using the term employee relations enables them to adopt a broader canvas and to:
• Encompass the now dominant service sector which, in many developed countries,
now employs more than 70 per cent of the workforce, and the changes in the
composition of the labor force such as more women working and more part-time,
temporary and fixed-term contracts;
• Include non-union as well as union scenarios and relationships.
• The managerial focus identified by Marchington and Wilkinson
is also adopted by Gennard and Judge (2002). They explain
that:
• Employee relations is a study of the rules, regulations and
agreements by which employees are managed both as
individuals and as a collective group, the priority given to the
individual as opposed to the collective relationship varying from
company to company depending upon the values of
management. As such it is concerned with how to gain people’s
commitment to the achievement of an organization’s business
goals and objectives in a number of different situations ...
• According to Marchington and Wilkinson (1996) also the term
employee relations has emerged for three main reasons:
• Usage, fashion and slippage.
• It is increasingly used by personnel practitioners to describe that
part of personnel and development concerned with the
regulation of relations (collective and individual) between
employer and employee.
• There are actual and real differences of focus, with employee
relations tending to focus upon management and management
issues alone and on contemporary rather than historical
practices; the way things are as opposed to the way things were.
• From the employee relations perspective, an
employee is an asset rather than a cost, and
open communication and goal orientation are
encouraged.
• It is accepted that legitimate differences exist
in workplaces, but the aim is to reduce conflict
through effective procedures and
relationships.
• A business seeking to improve performance
will use its employee relations processes to:
• Encourage an effective workforce as a way of
adding value to all areas of its organizational
performance
• Focus on using specific strategies to retain,
reward and motivate effective and skilled
employees.
 Employee Relations, Strategy and Business
objectives
• Profit and profitability
• Customer and staff satisfaction
• Improving product quality
• Acting ethically
• Social responsibility
 Key Stakeholders
1. In the organization:
• Employers
• Employees
2. In the operating environment
• Trade unions
• Employer association
3. In the macro-environment
• Peak union bodies
• Peak employer bodies
4. Government and regulating bodies
 Employment Relationship
• No employment relationship occurs in a vacuum
and it is important to understand the related
contexts within which it occurs at what varying
degrees upon which the relationship is dependent.
• The legal context and at the level of the individual,
there is a legally enforceable contract between
employee and employer. Hence the employment
relationship can be perceived as a psychological
contract.
 Psychological Contract: Interest and
Expectations
• Schein (1988) has majorly contributed in
psychological contract and has suggested that
there exists an implicit relationship between
employer and employee
• This implicit contractual relationship is
derived from a series of assumptions on the
part of employer and employee about the
nature of their relationship.
• The main assumptions are:
• That employees will be treated fairly and honestly;
• That the relationship should be characterized by a concern
for equity and justice and that this would require the
communication of sufficient information about changes
and developments
• That employee loyalty to the employer would be
reciprocated with a degree of employment and job security
• That employees’ input would be recognized and valued by
the employer.
• Though these assumptions may not be legally
enforceable but they constitute a set of
reciprocal arrangements and form the basis
for a series of expectations which may have a
considerable degree of moral force.
• Gennard and Judge (2002) in discussing the psychological contract and
employees’ and employers’ interests, suggest that besides the reward package
representing the monetary and extrinsic aspect of the relationship, employees
may have the following expectations:
• Security of employment
• Social relations and sociable atmosphere
• Potential for advancement
• Access to training and development
• To be treated as a human being rather than as a commodity
• Job satisfaction and empowerment regarding their job
• Family friendly/work life balance conditions of work
• Fair and consistent treatment
• Some influence over their day-to-day operations but also at a policy level (often
the term ‘voice’ is used in this context).
• The employers have the following implicit
expectations from the employees:
• Functional, task, flexibility
• Minimum standards of competence
• Willingness to change
• Ability to work as a member of a team
• Commitment to achieving organizational objectives
• Capability to take initiative
• The talent to give discretionary effort.
 Forms of Attachment, Compliance and
Commitment
• Etzioni (1975) suggested that employees were
engaged with, attached to or involved with
employing organizations in a number of different
ways and with differing degrees of intensity and this
still has relevance today.
• He used the term compliance rather than
attachment and divided compliance into two
elements: the form of power wielded by the
employer to achieve control and the nature of the
employee’s involvement.
• Etzioni identified three different sources and
forms of power that could be utilized by
employers and three different forms of
involvement.
• He named the sources and forms of power as
coercive, remunerative and normative, and the
forms of involvement were named as
alienative, calculative and moral.
• According to the Etzioni model or typology the
term ‘commitment’ refers to moral
involvement, employees positively identifying
with and sharing the values and purposes of
the organization.
• Commitment is portrayed as an internalized
belief leading to constructive proactivity by
employees; it leads to employees ‘going one
step further’ (Legge, 1995:
• The major contribution in industrial relation system
was given by John T. Dunlop in 1958.
• The Industrial Relations subsystem Dunlop identifies a
range of Inputs, Processes and Outputs.
• The outputs or outcomes of the system are a body of
both procedural and substantive rules, which
together govern the actors at the workplace, and the
purpose of the system framework is to facilitate the
analysis and explanation of these rules, their
formulation and administration.
 Outputs
• Substantive rules are outcomes such as rates of pay or hours of
work and the procedural rules referred to as an output of the
system comprise both the rules governing the determination
of the substantive rules, the ‘how’ that explains rule
determination, as well as the procedures governing the
application of the rules in particular situations.
• These procedures can be seen as the rules of governance, the
rules created (by different processes) to govern the interaction
of the parties engaged in the rule- making process as well as to
determine and act as a point of reference for decisions
concerning the application of substantive rules.
 Inputs
• Dunlop explained the three types of independent variable falling
into this category, actors, contexts and ideology.
• The three main actors in the system are:
• A hierarchy of non-managerial employees and their
representative collective institutions, the trade unions and
similar associations, which may be competitive with each other.
• A hierarchy of managers and their representatives which will
encompass managerial and employers associations.
• Various third-party agencies, including government agencies, for
example in the UK the ACAS or in America the National Labour
Relations Board (NLRB).
 Context
• Technology: The technological context has significant implications for
and impact upon the interactions within the system and the
outcomes
• For example, the technology available at any one time will impact
upon the production process and the organization of work in turn
influencing the nature of skills, quantity and location of labor
demanded.
• Market or budgetary influences: Product markets are particularly
important to the interactions and outcomes. Recent years have
demonstrated this with many arguing increased international
competition in product markets as one of the major influences in the
drive for flexibility of labor and the development of models of the
flexible firm.
 Ideology
• It can be described as the collection of assumptions,
values, beliefs and ideas that, shared by all the
parties, will have the effect of binding the system
together and rendering it stable.
• The hallmark of a mature industrial relations system
is that the ideologies held by the main actors are
sufficiently congruent to serve the purpose of
allowing common ideas to emerge about the role
and place of the actors within the system.
 Processes
• Dunlop identified a number of processes through which
this might happen and the dominant process in the UK,
USA and other developed countries was collective
bargaining, a process through which the parties seek to
resolve conflict and determine jointly agreed rules, both
substantive and procedural.
• Other processes that might apply the use of third parties
either through the process known as conciliation or that
known as arbitration, or the government might intervene
and determine rules via the mechanism of legislation.