THEORETICAL

PERSPECTIVES
OF THE
EMPLOYMENT
RELATIONSHIP
Foundations and Current Issues
in IR/HR

January 18, 2024

 HOUSEKEEPING

• Backgrounder survey
• Oral Exam
• Employment in the News Paper – finalize
groups
ECONOMIC
REGIMES
 ECONOMIC REGIMES
• Capitalism: private ownership; invisible hand; no/little
state intervention
• Socialism: a transitional social state between the overthrow
of capitalism and the realization of Communism
• Government owns the means of production
• At some point, people started conflating socialism with
“capitalism with extensive welfare state”
• A more precise term for this type of arrangement = social
democracy
• Communism: community/people own means of
production
THE EMPLOYMENT
RELATIONSHIP
(BUDD, 2004)
 WHY THEORY?

• Simplify and systematically understand a

complex reality
• Explain social phenomena
• Make predictions
• Address and mitigate workplace and societal
issues
 EXAMPLE

Why do wages differ across workers?

 EMPLOYMENT RELATIONSHIP
PERSPECTIVES
• Competing perspectives or ideologies on the
employment relationship arise from individuals’
theories about how the world works and how people
behave
• Guide employers, managers, employees, scholars,
policymakers, lobbyists, and activists in the
identification and evaluation of work/employment
problems
• Shape employment outcomes
 EMPLOYMENT RELATIONSHIP
PERSPECTIVES
• These perspectives precede and predict support
for and/or opposition to different approaches to
governance of work and the employment
relationship, and different employment practices
and systems within organizations
• Requires differentiating between how we think
the world actually works and how we think it
“ought” to work
 EMPLOYMENT RELATIONSHIP
PERSPECTIVES
• Our perspectives on the employment relationship
affect:
• What problems we see in the employment relationship
and the solutions we propose to these problems
• Our assumptions about power and conflict among the
employment relationship actors
• How we think employment should be governed and
regulated – including how conflict among actors should
be resolved
 EXERCISE

Record answers to the following questions:

1) Do you think labour should be viewed as a
commodity? (Yes/No)
2) Do you think employers and employees
have equal power in competitive labour
markets? (Yes/No)
 EXERCISE

If you answered YES to EITHER question,

record “neoliberal.”

If you answered NO to BOTH questions, move

to question 3….
 EXERCISE

3) Do you think that conflict is a natural part

of the relationship between employers and
employees AND that it can never be
completely resolved? (Yes/No)
 EXERCISE

If NO, record “managerialist.”

If YES, move on to question 4…
 EXERCISE

4) Do you think the source of conflict between employers

and employees is primary economic or primary socio-
political?
Economic: employees must sell their ability to work to management, subject
to agreed upon terms and conditions of employment, conflict arises because
the terms are unacceptable to one party
Socio-Political: employees must submit to managerial authority and power,
complying with managerial rules and directives in the day-to-day
performance of their work; conflict arises because employees sometimes do
not submit to this authority and managerial directives
 EXERCISE

If SOCIO-POLITICAL, record “radical.”

If ECONOMIC, move onto question 5….
 EXERCISE

5) Is providing employees with a voice in

organizational decision-making important?
(Yes/No)
 EXERCISE

If YES, record “orthodox pluralist.”

If NO, record “liberal reformist.”
 POLL
POLL

What is your employment relationship

perspective?
DISCUSSION QUESTION

Were your answers to these questions based on

your experience as a worker/employee or as a
HR/IR professional?

Should/does your perspective differ depending

on the role you situate yourself in?
 THE EMPLOYMENT
PERSPECTIVES
( G O D A R D , 2 0 1 7 : 11 )

Managerialist
Orthodox
Topic Neoliberal (Unitarist Liberal Reformist Radical
Pluralist
Perspective)

Primary Balancing Inequality/ Social

Efficiency Worker Loyalty Power/ Control
Concern Objectives Justice

HR Policies/ Social Services/ Employee

Mechanism(s) Markets Unions, Law
Practices Legal Reform Ownership

Power Not Important______________________________________________Fundamental

Conflict of None_____________________________________________________Fundamental
Interests Primarily Economic________________________________________Primarily Social

Political
Right/Individual_______________Centrist______________________Left/Collective
Ideology
 NEOLIBERAL
( G O D A R D 2 0 1 7 – TA B L E 1 . 1 ; B U D D E T A L . , 2 0 1 9 – TA B L E 3 . 1 )

- Main concern: maximizing efficiency

- Employees: rational, self-interested agents seeking to maximize utility by
optimizing their labour-leisure trade-off; viewed as commodities
- Employers: rational, self-interested agents seeking to maximize profit
- Assume markets are perfectly competitive; markets drive the employment
relationship by matching self-interested employees and employers (wages,
employment, benefits, etc.)
- Employment relationship = voluntary, mutually beneficial trade in a free market
by rational, self-interested agents

Perfectly competitive labour market ensures equal power between employees and
employers and no conflict
Labour unions and government labour standards interfere with market
 MANAGERIALIST
( G O D A R D 2 0 1 7 – TA B L E 1 . 1 ; B U D D E T A L . , 2 0 1 9 – TA B L E 3 . 1 )

- Main concern: maximizing worker loyalty

- Employees: psychological beings motivated by intrinsic awards (psychological
rather than economic beings)
- Employers: profit-maximizing organizations with a self-interest to align interests
with those of employees
- Markets important for establishing broad terms and conditions of employment but
not deterministic
- Employment relationship = long-term partnership between employees and
employers who share a unity of interests

Minimize conflict and power differentials by using progressive managerial

practices and treating workers fairly (intrinsic rewards over extrinsic)
Ambivalent to labour unions and government labour standards
 ORTHODOX-PLURALIST
( G O D A R D 2 0 1 7 – TA B L E 1 . 1 ; B U D D E T A L . , 2 0 1 9 – TA B L E 3 . 1 )

- Main concern: balancing efficiency, equity and voice

- Employees: economic and psychological beings with moral and
democratic rights
- Employers: profit-maximizing organizations with some economic
conflict of interests with employees
- Markets are imperfectly competitive  unequal bargaining power
between employers and employees
- Employment relationship = bargain between stakeholders with
pluralistic economic interests and unequal bargaining power

Unequal bargaining power; conflict limited as parties have common

interest in long-run growth of organization
Labour unions and collective bargaining provide workers with power so
that they can approach their employers as equals (strength in numbers)
 ORTHODOX-PLURALIST
(FIGURE 1.1, BUDD, 2004B)

Objectives of the Employment Relationship

VOICE

EFFICIENCY EQUITY
 ORTHODOX-PLURALIST
(BUDD, 2004B)

Efficiency
• Effective use of scarce resources
• Standard of economic performance: Pareto optimality
• Closely associated with the business objective of maximizing
profits
• Primary objective of the employer
• Neoclassical assumptions about human behavior will lead to
the idea that “laissez-faire” competitive markets and well-
defined and enforceable property rights will maximize
efficiency
 ORTHODOX-PLURALIST
(BUDD, 2004B)

Equity
• A set of fair employment standards covering both material
outcomes and personal treatment that respect human dignity and
liberty
• Standard of treatment: minimum standards and distributive and
procedural justice to protect the dignity of workers as human beings
• Primary objective of the employee
• What is an “equitable” or “fair” outcome? Difficult to define.
• While consideration of equity may increase efficiency, the
embodiment of labour in human beings necessitates some basis for
including equity as a consideration (even if it does not enhance
efficiency)
 ORTHODOX-PLURALIST
(BUDD, 2004B)

Voice
• Ability for employees to have meaningful input into decisions that
affect their working lives
• Intrinsic standard of employee participation
• Differs from equity because blocking inequities is not the same thing
as removing conflict or allowing workers to contribute to working life
• Primary objective of the employee
• Definition of “voice” more likely to differ across employees and often less
explicitly pursued
• Self-determination and autonomy as important ends unto themselves,
even if they reduce efficiency
 ORTHODOX-PLURALIST
( B A R RY & W I L K I N S O N , 2 0 1 6 )

Voice in Industrial Relations

Who: collective
Agent: trade unions (independent of employer; external
legitimacy)
Motive: challenge management; improve wellbeing of
workers; employee self-determination; industrial democracy

Voice in HR/OB
Who: individual
Agent: management
Motive: improve productivity/organization
 Where would you place ‘Spill’ on this figure?

VOICE

EFFICIENCY EQUITY
 Where would you place ‘Spill’ on this figure?
• Equal salaries
VOICE • Theory  harmony
• Practice  conflict
• Salary too low: difficult to
retain software engineers and
salespeople
• Salary too high: applicants
apply for wage rather than
SPILL alignment in values
EFFICIENCY EQUITY • “We realized we had to pay
attention to market forces”
(Howell 2021)
LIBERAL REFORMIST
( G O D A R D 2 0 1 7 – TA B L E 1 . 1 )
 RADICAL
( G O D A R D 2 0 1 7 – TA B L E 1 . 1 ; B U D D E T A L . , 2 0 1 9 – TA B L E 3 . 1 )
 EMPLOYMENT PERSPECTIVES &
HR PRACTICES
(BUDD ET AL., 2021)

MANAGERS’ FRAMES & THE ORIGINS OF HR

PRACTICES
• “Managers’ frames of reference will affect their approach to
HR policies and practices such that a neoliberal-egoist
manager will adopt practices consistent with a transactional
approach, a [managerialist] manager with a commitment
approach, a pluralist manager with an
accommodative approach and a [radical] manager with a
cooperative approach.” (p. 14) ​
 EMPLOYMENT PERSPECTIVES &
HR PRACTICES
(BUDD ET AL., 2021)

EMPLOYEES’ FRAMES & SENSEMAKING

• “Employees frames of reference will shape their responses to
HR policies and practices. When employees’ frames match
with managers’ frames, there will be stability in HR
practices. When employees’ frames do not match with
managers’ frames, there will be greater potential for
recurring conflict in the employment relationship.” (p. 16)
 EMPLOYMENT PERSPECTIVES &
HR PRACTICES
(BUDD ET AL., 2021)

MISMATCHED FRAMES
• Matches may be more frequent than mismatches depending
on recruitment and selection.
• Why might there be mismatches?
• Recruitment and selection overlooks this aspect of fit
• Inconsistent application of HR policies across organization
• Perspectives changing over time due to exposure to new
perspectives
• New organizational leaders have a different frame
• Generational changes
 SUMMARY
• Each one of us has an employment perspective that influences
how we interpret the world around us and the employment
relationship we find ourselves in
• Your employment perspective will impact the types of HR
practices that you implement in the workplace and the policies
you advocate for outside of the workplace in the public
domain
• The employees you hire and manage will also each have their
own perspective – keep this in mind when conflict
(inevitably?) arises in the workplace
QUESTIONS?
QUERCUS DISCUSSION
 REFERENCES
• Barry, M., & Wilkinson, A. (2016, August 23). The HR literature won’t give you a
complete picture of employee voice. LSE Blogs.
• Budd, J.W. (2004A). Balancing outcomes: The environment and human agents.
Employment with a human face: Balancing efficiency, equity, and voice (pp. 47-
65). ILR Press.
• Budd, J.W. (2004B). The objectives of the employment relationship. Employment
with a human face: Balancing efficiency, equity, and voice (pp. 13-31). ILR Press.
• Budd, J. W., & Bhave, D. P. (2019). The employment relationship: Key elements,
alternative frames of reference, and implications for HRM. The Sage Handbook of
Human Resource Management. (pp. 41-64). ​
• Budd, J. W., Pohler, D., & Huang, W. (2021). Making Sense of (Mis) Matched
Frames of Reference: A Dynamic Cognitive Theory of (In) Stability in HR
Practices. Industrial Relations: A Journal of Economy and Society.
• Godard, J. (2017). Foundations: Concepts, issues and debates. Industrial Relations,
economy, and society (5th ed.). (pp-1-20).
• Howell, J. (2021, January 27). CEO secrets: ‘We tried paying everyone the same
salary. It failed’. BBC News. Barry, M., &