UNIT 18
STRATEGIC EMPLOYEE RELATIONS : EMERGING TRENDS
Strategic Employee Relations : Emerging Trends
Objectives After going through this unit, you should be able to understand: ●
the new perspectives of 1990s and implications of post-modernism for employment relations;
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the management of new IR and the compatibility of HRM and new IR strategies; and
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the implications of latest developments in HRM for industrial relations issues.
Structure 18.1 Introduction 18.2 The New Perspectives of 1990s 18.3 Implications of Post-Modernism for Employment/Industrial Relations 18.4 Management and Industrial Relations Strategies 18.5 Industrial Relations Strategy 18.6 Summary 18.7 Self-Assessment Questions 18.8 Further Readings
18.1
INTRODUCTION
“They have besides a new system of strategy which has out-maneuvered and overwhelmed all the armies of Europe” - Lord Wellington about French troops The moral of the above statement is: “however good may be your troops and your tactical movements, effective strategy is essential to success in the military sphere.” This is what exactly is happening in the battlefield of business world in the wake of globalisation. Business organisations are locked in a neck-and-neck competition vying with one another to push their products and services, to wean the customers away from their competitors and to continuously enlarge their own customer-base. Gone are the days when business organisations enjoyed State protection and patronage in the form of high rates of import duties on foreign goods, which helped them to thrive in the market even when the products manufactured and services rendered by them were of sub-standard quality. The consumers had little choice in the market place and were at the receiving end for a long time. This scenario underwent a radical change with the opening of Indian markets to foreign players. The free-flow of foreign direct investment (FDI), the setting up of manufacturing facilities in India by foreign business houses, the outsourcing of business processes, and the increasing focus on customer-satisfaction and service, all point to one phenomenon – gaining competitive advantage in the market place. Business strategies are being devised by corporations all over towards achieving this goal. ‘Strategy’ can be defined as the “framework which guides those choices that determine the nature and direction of an organisation”; “a comprehensive plan of action that guides allocation of resources to achieve long-term organisational objectives.” Strategic management can be defined as “leading the process of
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Trends in Employment Relations
formulating and implementing strategies to achieve long-term organisational success.” The two important strategies, which the business organisations generally opt for, are: (a) differentiation, i.e., seeking competitive advantage through uniqueness of product or service, and (b) cost leadership, i.e., seeking to achieve lower costs than competitors by improving overall efficiency of operations. Both these generic strategies have implications for human resource management of which ‘employee relations’ is an integral part. In this fast changing business world coupled with advances in information technology, every conceivable aspect of business can be copied, be it the organisation structure, technology or process. The only thing that cannot be copied easily is the unique human factor and the innovation and creativity which people are endowed with. It therefore follows that in the changing dispensation, human beings are considered as an invaluable resource and an asset that can give sustainable competitive advantage to the organisation. This approach to employees as assets has vital implications for the strategic human resource management, which can be defined as “the process of developing a consistent, aligned set of policies and practices, which facilitate the realization of organisation’s strategic objectives.” Viewed in this perspective, several concepts which held sway over personnel and industrial relations function during the major part of 20th century have either been stripped of their traditional meaning or have been replaced by new concepts. ‘Employee relations’ is no exception to this turbulent change. The manner in which the relationship had evolved up to the 1980’s with a sharp focus on collectivism, trade union rights, job security, etc., no longer retains its traditional flavour in the wake of changing business environment on a global scale.
18.2
NEW PERSPECTIVES OF 1990s
There has been a significant change in the industrial relations management during the 1990s, which can be studied with reference to the three major perspectives, which dominated the scene: i)
Liberal individualism and neo-laissez faire
ii)
Human resource management
iii) Modernism vs. Post-Modernism i) Liberal individualism and neo- laissez faire The advent of conservative governments and the product-market imperatives resulting in an onslaught on trade unionism heralded a new era of liberal or laissez faire individualism more reminiscent of early 19th century but adapted to late-20th century conditions. The characteristics of liberal individualism are:
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a)
That economic conflicts of interest should be freely entered into by individual employees and employers operating in competitive markets.
b)
That collective relationships between trade union federations and employers’ associations upset the working of the free market mechanism and should be avoided.
c)
That in order to ensure the greatest benefit for all, individual workers should gain with individual employers over the contract of employment and any conflicts arising between them at that stage should be resolved.
d)
That once the employment contract is consummated, the employment relationship should be entirely free of conflict and the employee should accept the authority of the firm in the best interests of all.
e)
That any combination by trade unions or employers’ associations to influence the terms of employment was to be deplored because this would upset the competitive market forces which determine a fair price for labour and ensure the greatest efficiency in terms of production and allocation of resources.
f)
That it is best for individuals, in a free society, to take responsibility for their own actions and not to rely on others such as trade unions and the State.
g)
That there should be no intervention by the state in private sector collective bargaining where market forces should dominate;
h)
That there should be no intervention in the labour markets to the detriment of labour flexibility and efficiency;
i)
Deregulation of labour markets by dispensing with legal and other restrictions;
j)
Privatisation of many public sector industries thereby ‘liberating’ them from state control and exposing them to market forces; and
k)
‘Contracting out’ of local authority services to private companies.
Strategic Employee Relations : Emerging Trends
ii) Human Resource Management a)
The growth in the uptake of HRM has coincided with a steady decline in importance of industrial relations as a central feature of economic performance and policy. It also coincided with a decline in the membership and influence of trade unions.
b)
HRM has been applied to a diverse range of management practices and strategies and the term is often used by many employers as a more acceptable substitute for personnel or industrial relations management.
c)
The importance of HRM for our understanding of industrial relations and industrial relations change ‘lies in its association with a strategic, integrated and highly distinctive managerial approach to the management of people. (Salamon, 1998, p. 19).
d)
The ‘hard’ version of HRM focuses on human resource strategy and employee utilisation; and the ‘soft’ HRM focuses on the ‘human’ aspects of management and concern with people in organisations.
e)
HRM approaches emphasise the individual rather than the collective regulation of the employment relationship and the direct relationship between management and its employees.
iii) Modernism vs. Post-modernism ‘Modernism’ refers to the era in which factory system of production flourished during the 19th century and throughout the major part of 20th century. This era was characterized by social organisation of production, the division of labour and assembly line of operations coupled with narrow specialization. During 1980’s and 1990s, these traditional systems have been gradually replaced by technology-driven production systems with a shift in focus from ‘skill’ to ‘knowledge’. ‘Post-modernism’ is a new concept, which took birth in 1980s and 1990s, embraces the notion that advanced capitalist societies are experiencing monumental and significant changes, and movements away from the previous ‘modernist’ era. More specifically, the ‘post-modernism’ represents a change in assumptions as detailed below: ●
Knowledge work as against skill work,
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Customised products as against standardised products of mass production era (which is often referred to as ‘Fordism’),
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Multi-skills as against narrow specialisation in one particular functional area, 7
Trends in Employment Relations
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Flexible workforce as against workforce which was rigid in terms of skills and abilities, and
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Consumerism and customer-orientation.
18.3
IMPLICATIONS OF POST-MODERNISM FOR EMPLOYMENT/INDUSTRIAL RELATIONS
The post-modernist approach to human resource management has far reaching implications for employment relations as detailed below: ●
The outlook for IR is very pessimistic.
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Industrial disputes are likely to diminish with the move away from Fordism, with an increasing emphasis upon work, which is flexible, more skilled and challenging.
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As a result of the permanent decline in conflict, employees will find union membership increasingly irrelevant.
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‘Working class’ will become increasingly fragmented and this will make it difficult for the union movement to represent these disintegrated interests and its role as a political actor is therefore likely to diminish. Post-modern analysis suggests that the trade union movement is in terminal decline.
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The term ‘employee relations’ and the ‘individualistic’ preoccupation of HRM are both part of a post-modernist project.
18.4
MANAGEMENT AND INDUSTRIAL RELATIONS STRATEGIES
Industrial relations strategies and policies are concerned with influencing and directing the employment relationship in the medium to long term. However, the management of industrial relations has traditionally been low in the order of organisational priorities and smaller firms generally have an unstructured and day-to-day approach to industrial relations management. Much of the industrial unrest of the 1960s was attributed to the inadequate conduct and management of industrial relations at corporate headquarters frequently ignorant or out of touch with what was going on at the workplace. Corporate industrial relations should therefore be reviewed and appropriate strategies and policies devised and implemented, which would reconstruct workplace industrial relations through the operation of positive personnel policies, formalisation of industrial relations procedures concerning dispute, discipline and grievance handling, creation of orderly collective bargaining machinery and the formal incorporation of the shop steward within the negotiation process. The traditional antipathy of managements to the formation and formalisation of effective policies, procedures and practices in industrial relations can be explained in terms of:
8
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Fear of sharing power with trade unions as this may threaten the decision making authority and legitimacy of management.
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Lack of managerial expertise in industrial relations is indicative of a lack of commitment to managing IR at the senior levels as, for example, Board level appointments hardly find an IR expert being inducted.
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There is no ‘one best way’ to manage conflicts, only different routes to partial failure, which forces one to conceptualise managerial strategy ‘as the pragmatic choice among alternatives none of which can prove satisfactory’.
18.5
INDUSTRIAL RELATIONS STRATEGY
Strategic Employee Relations : Emerging Trends
Industrial relations strategy can be defined as the ‘long-term goals developed by management to preserve or change the procedures, practices or results of industrial relations activities over time’. The existence of such strategies is based on the following assumptions: ●
Corporate management determines overall strategies to achieve the organisational goals;
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Strategic thinking is a prerequisite for organisational success;
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Top management have some choice in the matter;
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The choice of industrial relations strategies and policies rationally implies that they be limited to other objectives and policies; and
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There should be a direct relationship between industrial relations strategies and business strategy;
‘New IR’ and the Compatibility of HRM and New IR’ Strategies What is new Industrial Relations? New industrial relations represents three ideological images propagated by the contemporary state: first, the promotion of the managerial prerogative, employee compliance and a low strike level; secondly, a rejection of collective bargaining and trade union recognition as public policy and their replacement with managerially determined regulation and individualism in the employment relationship; thirdly, a prescription for management of labour to use strategies centered on flexibility and extra-contractual commitment through human resource management. Each image evokes the formative influences of libertarian laissez-faire . . . and rejects influences centered on pluralism, collective bargaining and trade unions. The practices associated with the ‘new’ IR are diverse, although it is possible to identify three distinct patterns of industrial relations arrangements, which comprise: a)
The ‘Japanese model’
b)
Union avoidance and de-recognition
c)
The challenge of HRM
a) The ‘Japanese Model’ This is exemplified by the original Toshiba Consumer Products factory set up in Plymouth in 1981 and contains the following elements: ●
Sole bargaining rights for a single trade union;
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A ‘no-strike’ agreement with binding ‘final offer’ arbitration as a last resort in ‘interest’ disputes;
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A broadly-based forum for consultation and employee participation;
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Complete freedom on the part of management to organise work.
b) Union Avoidance and De-Recognition The second component of the ‘new’ IR relates to the complete and continuing avoidance of trade union involvement. Union avoidance at new workplaces was far less controversial and thus attracted much less public attention. In many private sector industries, particularly those dominated by small independent firms, the absence of trade unions has always been the common pattern. However, it is not clear whether union avoidance has become a more common feature of newer workplaces.
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Trends in Employment Relations
c) The Challenge of Human Resource Management According to one survey conducted in 1992, it was found that HRM had exercised significant impact on industrial relations in both the unionised and non-unionised situations as detailed below: i)
Multiple channels of communication more likely to be used in unionised workplaces.
ii)
Non-union workplaces are characterised by authoritarian and hierarchical management practice.
iii) Non-unionised workers had few opportunities to influence their working lives. iv) Workers in unionised companies received more information about their conditions of work than employees in non-unionised companies. v)
‘Financial participation’ was as common in unionised as in non-unionised firms.
vi) The most anti-union employers were least likely to offer financial participation schemes. vii) Unionised employers were more likely to collect information on the general composition of their workforce and pursue equal opportunities policies. Activity A List out the differences between new and old IR strategies. Explain the advantages and disadvantages of new and old IR strategies. ................................................................................................................................. ................................................................................................................................. ................................................................................................................................. ................................................................................................................................. .................................................................................................................................
Implications of these Developments for Industrial Relations Issues The developments identified above have affected industrial relations issues in the following ways: In organisations where HRM is well established and demonstrates high levels of management involvement and employee commitment, it is more likely that elements of the ‘new’ IR will be incorporated into HRM and operated relatively successfully. Within unionised contexts, it has already been established that individual unions are modifying their approaches on both individualistc and collectivist dimensions. Within non-unionised contexts, most UK organisations do not have welldeveloped HRM. There was sizeable minority of UK green-field site operations, whose industrial relations were largely integrated within HRM. Explanation: Greenfield sites are those places, where there is little or no union activity and where the employers are free to offer employment on the condition that the employees will not join or form a union. In so far as collective bargaining is concerned, the evidence of 1980’s and 1990’s indicates that the coverage of collective bargaining has contracted substantially; the scope of bargaining has narrowed; the depth of union involvement has diminished; and that organisational security offered to unions by employers has deteriorated. However, there is no evidence to support the view that the new IR and the non-unionised labour market, where it has emerged, has really improved organisational competitiveness. The changes, the reasons behind them and the impact of them upon industrial relations have helped to create a new climate in which industrial relations operates. They have 10
undoubtedly encouraged managements to take HRM initiatives and adopt human resource strategies geared towards improving employee productivity and commitment and fostering a more harmonious and co-operative employee-oriented organisational culture.
Strategic Employee Relations : Emerging Trends
Styles and Strategies in Small Businesses Small businesses are extremely diverse in composition of employment and within the product markets of the many industrial sectors in which they operate. They tend to experience highly fluctuating levels of performance and business fortunes and also high incidence of bankruptcy. Collectively, they employ a high proportion of the workforce whose skills range from high and non-transferable (the minority) to low and highly substitutable (the majority). The styles and strategies which owner-employers use such as paternalism, fraternalism and benevolent autocracy would appear to be far more characteristic of non-union firms than unionised firms, although it is possible to expect some overlap of styles between the two categories. The particular style adopted will vary according to the extent of the employer’s economic dependence on employees and the ability of employees to resist the exercise of the employer’s prerogative.
Style and Strategy in Medium-sized Firms Medium-sized firms are reported to have been following styles and strategies as detailed below: ●
The HRM approach is only one of the several approaches to regulating the employment relationship in non-union firms and establishments.
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Newer establishments are more likely to be non-union than older establishments irrespective of whether they are British or foreign owned.
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Firms that have recently de-recognised unions within their workplaces and establishments are more likely to retain a collective orientation toward certain aspects of the employment relationship concerning, for example, employee representation and pay determination, albeit on management’s terms.
●
Firms and establishments which have been ‘union-free’ since their inception are likely to adopt one of two employer regimes:
●
A ‘soft’ or ‘traditional’ HRM approach whereby employees enjoy superior pay and conditions and have a measure of job security and therefore do not perceive any need for trade union representation; and
●
An approach which is deliberately hostile to any trade union presence and representation where employees enjoy the flexibility of a disposable workforce and regulate by fear.’
Strategy and Style in Large Organisations Numerically, large non-union firms are in a minority, but have a high profile in the HRM, and, increasingly, industrial relations texts and other publications. Companies such as Marks and Spencer and IBM ‘have always been held up as exemplary nonunion employers’. More recently, companies such as Hewlett Packard, Texas Instruments, Gillette, Mars, Eastman-Kodak, Polaroid, Digital Equipment Corporation, Wang Electronics B.V. and Verbatim have joined the ranks of large nonunion organisations.
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Trends in Employment Relations
Activity B What do you understand by new IR strategies? Do a study in about five companies in your vicinity and see how many of these companies are implementing new IR strategies. ................................................................................................................................. ................................................................................................................................. ................................................................................................................................. ................................................................................................................................. .................................................................................................................................
Generic Characteristics of Large non-union Firms Large non-union firms are generally characterised as: ●
American and privately owned;
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operating mainly in non-manufacturing and service sectors;
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employing mainly non-manual, skilled or partially skilled workers;
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profitable or highly profitable and commercially successful in expanding product markets;
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have ‘covertly non-union personnel policies’;
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justifying their non-union status by substituting alternative forms of employee representation and providing higher rates of pay and better conditions of work than unionised organisations;
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claiming to have enlightened and progressive personnel and HRM policies and ‘people centered’ managerial styles making unions and collective bargaining in irrelevancy;
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have ‘single status’ for employees, employment security, promotion from within; and
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have careful selection and training for management, especially at supervisory level.
In order to understand the motives of non-union managements in keeping unions out of large organisations, Flood and Toner (1997) identify a number of perceived disadvantages on the part of management within three broad categories concerning communications, work organisation, and conflict, which are listed below. a) Communications The major disadvantage in this category is that the presence of unions makes communication more difficult, impedes personal contact, and gives rise to bureaucracy. b) Work organisation The disadvantages in work organisation could be:
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●
unions make change more difficult;
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unions give rise to demarcation and inter-union argument;
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unions impose restrictions on production;
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unions cause general lack of flexibility;
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unions impose higher manning levels;
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unions protect unsatisfactory workers;
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unions inhibit individual and reward systems.
Strategic Employee Relations : Emerging Trends
c) Conflict The following have been identified as the disadvantages in this category: ●
unions give opportunities for radicals to stir up trouble;
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unions promote an adversarial climate;
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unions encourage pursuit of trivial grievances; and
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unions cause strikes and stoppages.
18.6
SUMMARY
The emerging trends in respect of strategic employee relations present a highly complex picture. In USA, the non-unionised firms seem to be consistently on the increase and have clearly outnumbered unionized firms. This phenomenon is largely because of the very large number of small and medium sector enterprises which fall in the non-union category. The two extreme styles and strategies of non-union firms have been described as anti-union ‘bleak-house’, where management deliberately seeks to deprive workers of their rights, most notably to trade union representation, or the more progressive ‘happy house’, where management lavish benefits on workers with the result the workers fail to perceive any need to join a trade union. Viewed from a historical perspective, the concept of non-unionism is not strange to Indian industry. A large majority of small-scale, proprietor-managed enterprises in the contemporary scene furnish ideal example of non-union units. Some of the reputed Indian companies in the medium and large-scale sector have, like: their American counterparts, attempted to thwart unionism by employing a range of techniques including threats and intimidation. Given the option, employers as a general rule prefer non-unionism for reasons, which are too obvious to need explanation. It was the unstinted support of Government through its regulatory framework in the context of ‘Welfare State’ that facilitated the growth of trade union movement to its present level. If the Indian industry has learnt to live with trade unions, it is not out of its volition, but notwithstanding it. Insistence on non-unionism has only become more pronounced and visibles in the wake of liberalisation and the entry of MNCs. Motorola, Proctor & Gamble, Perfetti, ICI (Thane unit), Samtel and SRF, among others, are reported to be pursuing the policy of non-unionism. From a sectoral point of view, Information Technology industry is patronising non-unionism vigorously. IT industry is, however, in a class by itself with a large proportion of white-collar professionals and high turnover rates, which attributes it does not share with other industries and, hence, cannot form a sound basis for drawing generalised inferences. Some of the factors which have a bearing on this issue in the Indian context are: a)
The aggressive approaches of Indian employers in the service sector to trade unionism;
b)
The growth of BPO organisations, a majority of which are of American origin and which are manifestly anti-union;
c)
The declining membership of trade unions, as, for instance, from 92 lakh members in 1989 to some 30 lakh members in 1997;
d)
The decline in the number of ‘skill’ workers and their replacement by ‘knowledge’ workers; and 13
Trends in Employment Relations
e)
A perceptible change in the attitude of the Central and State Governments towards trade unions and trade unionism.
The aforesaid trends taken together lead to the inference that Indian industry is proceeding on the same lines as its western counterpart in formulating its employee relations strategies. It, however, remains to be seen whether the decline in union membership and the consequent weakening of trade union movement is a permanent feature or whether this phenomenon is merely cyclical with the likelihood of its bouncing back sooner or later.
18.7
SELF-ASSESSEMENT QUESTIONS
1)
Explain the new perspectives of 1990s. Discuss the implications of postmodernism for employment relations.
2)
Discuss the role of management in the era of new industrial relations strategies.
3)
Explain the latest developments in HRM for industrial relations issues.
18.8
FURTHER READINGS
Salamon, M. (1998): Industrial Relations: Theory and Practice. London, Prentice Hall Storey, J. (1995): Human Resource Management: A Critical Text. London, Routledge Kelly, J. (1998), Rethinking Industrial Relations: Mobilisation, Collectivism and Long Waves. London, Routledge Nicholls, P. (1999): ‘Context and theory in employee relations’, in Hollinshead, G., Nichols, P. and Taily, S. (eds): Employee Relations. London, Financial TimesPitman Publishing Donovan (1968): Royal Commission on Trade Unions and Employers’ Associations 1965-68, Report. Cmnd 3623, London, HMSO Hyman, R. (1987): ‘Strategy or structure? Capital, labour and control’, Work, Employment and Society, vol. 1, no. 1, pp. 25-55. Farnham, D. and Pimlott, J. (1995): Understanding Industrial Relations. London, Cassel Thurley, K. and Wood, S. (eds), (1983): Industrial Relations and Management Strategy. Cambridge, Cambridge University Press Clark, I. (1997): ‘The state and new industrial relations’, in Beardwell, I.J. Contemporary Industrial Relations: A Critical Analysis. Oxford, Oxford University Press, p. 42. Trevor, M. (1988): ‘Toshiba’s new British company: competitiveness through innovation’, Unpublished paper, University of Cardiff, Wales, pp. 221-42: cited by Ed Rose, op. cit., p. 258. Millward, N. (1994): The New Industrial Realtions. London, Policy Studies Institute, p. 2. WIRT (workplace industrial relations in transition] survey (1992) Bacon, N. Storey, J. (1996): ‘Individualism and collectivism and the changing role of trade unions’, in Ackers, P., Smith, C. and Smith, P. The New Workplace and Trade Unionism. London, Routledge
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Guest, D. and Hoque, K. (1994): ‘The good, the bad and the ugly: employment relations in new non-unionised workplaces’. Human Resource Management Journal, vol. 5, no. 1, pp. 1-14
Brown, W. (1993): ‘The contraction of collective bargaining in Britain’, British Journal of Industrial Relations, vol. 31, no. 2, pp. 189-200
Strategic Employee Relations : Emerging Trends
Metcalf, D. (1993): ‘Industrial relations and economic performance’, British Journal of Industrial Relations, vol. 31, no. 2, pp. 255-83. Ed Rose (2001) Employment Relations, Financial Times Prectice Hall, p. 428. Hyman, R. (1997): ‘The future of employee representation’, British Journal of Industrial Relations, vol. 35, no. 3, pp. 309-36zx Gennard, J. and Judge, G. (1997): Employee Relations. London, IPD Ed Rose, op.cit., p. 436. Farnham, D. and Pimlott, J. (1995): Understanding Industrial Relations. London, Cassell Flood, P.C. and Toner, B. (1997), “Large non-union companies: how to they avoid a catch 22?”, British Journal of Industrial Relations, Vol. 35, No. 2, pp. 257-77. Rao, E.M. (1998), “Indian Trade Unions: On the Brink of Extinction?”, Personnel Today, Vol. XIX, No. 2, Jul-Sep, p. 17.
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