17-1 International

Business
_____________
s4hil____
Human Resource
Management
strategy
Labor Relations and
Industrial Democracy
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 17-2
Labor Relations in the
International Arena
 Labor relations
 Process through which management and workers
identify and determine the job relations that will be in
effect at the workplace
 Specific approaches to labor relations varies from one
country to another
 U.S. Approaches to Labor Relations
 Collective bargaining
 Process whereby formal labor agreements are reached by
union and management representatives
 Involves negotiation of wages, hours, and conditions of
employment and the administration of the labor contract

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 17-3
Labor Relations in the
International Arena (cont.)
 U.S. Approaches to Labor Relations (cont.)
 Union
 Organization represents workers in collective bargaining
 Has the legal authority to negotiate with the employer and
administrator the labor contract
 Unions gain representation rights only after certification
 Unions can decertify a union with which the members are
dissatisfied
 Workers may strike to support union’s demands
 Grievance
 Complaint brought by an employee who feels that he/she has
been treated improperly under the terms of the labor agreement
 Settlement of grievance attempted at various hierarchical steps

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 17-4
Labor Relations in the
International Arena (cont.)
 U.S. Approaches to Labor Relations (cont.)
 Mediator
 Person who brings both sides together and helps
them reach a settlement that is mutually acceptable
 Arbitrator
 Individual who provides a solution to a grievance
that both sides have been unable to resolve
themselves and that both sides agree to accept
 Labor relations are important because they
determine labor costs

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 17-5
Labor Relations in the
International Arena (cont.)
 Labor Relations in Other Countries
 MNEs have to adjust labor relations strategies
because host countries differ in terms of:
 Economic development
 Political environments
 Strike activity
 Regional differences
 Great Britain
 Labor agreement is not a legally binding contract
 Violations of the agreement carry no legal penalties
 Labor agreements are less extensive than in the U.S.

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 17-6
Labor Relations in the
International Arena (cont.)
 Labor Relations in Other Countries (cont.)
 Germany
 Unions and management have been cooperative in the past
 Labor harmony not adversely affected by unification of East
and West
 Union power is still quite strong
 Rights of workers addressed more carefully by management
 Japan
 Unions and management have cooperative relationships
 Contracts tend to be general and vague
 Disputes regarding the labor contract usually settled amicably
 Unions most active during the spring and end of the year

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 17-7
Labor Relations in the
International Arena (cont.)
 How Industrial Conflict Is Handled Around
the World
 Strike
 Collective refusal to work to pressure management
to grant union demands
 Lockout
 Company’s refusal to allow workers to enter the
facility during a labor dispute
 United States
 Most contracts outlaw strikes
 Rely on grievance procedure to resolve disputes
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 17-8
Labor Relations in the
International Arena (cont.)
 How Industrial Conflict Is Handled Around the World
(cont.)
 Great Britain
 Strikes more prevalent than in the U.S.
 System is not geared toward efficient resolution of conflicts
 Grievance handling is informal, cumbersome, and costly
 Germany
 Strikes and lockouts are prohibited while the contract is in force
 Contracts have different expiration dates
 Cooperation between union and management is not unusual

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 17-9
Labor Relations in the
International Arena (cont.)
 How Industrial Conflict Is Handled Around
the World (cont.)
 Japan
 Strikes and lockouts are very rare
 Few areas of disagreement between unions and
management

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 Figure 17-1
17-10 Annual Average Days Lost Due to Labor Disputes in
Economically Advanced Nations: 1990-1999

400
350
300
250
200
150
100
50
0
C ain

Po tes

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U Sw d

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 17-11
International Structure of Unions
 Intergovernmental Organizations
 International Labour Office (ILO)
 U.N. affiliate, consisting of government, industry, and union
representatives, that works to promote fair labor standards
 Organization for Economic Cooperation and
Development (OECD)
 Government, industry, and union group founded in 1976 that
has established a voluntary set of guidelines for MNEs
 Transnational Union Affiliations
 International Confederation of Free Trade Unions
(ICFTU)
 International Trade Secretaries (ITS)
 Focus on a particular industry

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 17-12
Industrial Democracy
 Rights that employees have to participate in
significant management decisions
 Common Forms of Industrial Democracy
 Codetermination
 Participation of workers on boards of directors
 EU directive requires all companies with more than 50
employees by 2008 to “inform and consult” workers’
representatives about company strategy
 Works Councils
 Result of either national legislation or collective bargaining
 Function to improve company performance, working
conditions, and job security

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 17-13
Industrial Democracy (cont.)
 Common Forms of Industrial Democracy (cont.)
 Shop Floor Participation
 Variety of approaches available (e.g., quality of work life)
 Financial Participation
 Profit and productivity sharing
 Collective Bargaining
 Can be a mechanism to obtain industrial democracy
 Industrial Democracy in Selected Countries
 United States
 Collective bargaining is the most common form
 Problem-solving teams
 Employee groups that discuss ways of improving quality,
efficiency, and the overall work environment

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 17-14
Industrial Democracy (cont.)
 Industrial Democracy in Selected Countries (cont.)
 United States (cont.)
 Special purpose teams
 Employee groups that design and introduce work reforms and new
technology
 Self-managing teams
 Employee groups that take over supervisory duties and manage
themselves
 Great Britain
 Collective bargaining and reliance on teams
 Germany
 Industrial democracy and codetermination are very strong
 Work councils perform a number of important functions

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 17-15 Employee Participation in All Levels of Danish Firms

Board

Safety
Director(s)
committee

Cooperation
Upper/middle management
committees
Partly
Safety
Autonomous
group
Groups
Shop
Employees
steward

Trade union club

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 17-16
Industrial Democracy (cont.)
 Industrial Democracy in Selected Countries (cont.)
 Sweden
 Industrial democracy geared toward ensuring the quality of
work life
 Workers sit on some boards of directors
 China
 Little known about industrial democracy in China
 Two policy-making committees within Chinese enterprises
 Japan
 Industrial democracy used to enhance workers’ performance
 Quality circle
 Enterprise unions
 Represent both the hourly and salaried employees of a particular
firm

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 17-17
Strategic Management of
International Labor Relations
 Philosophical Backdrop
 MNEs can use a number of starting points for their
approach to labor relations
 Ethnocentric
 Polycentric
 Geocentric
 Labor Costs
 Wages differ greatly from country to country
 Sweatshops are common throughout the world
 Hours worked are inversely related to hourly
compensation
 High paying jobs are transferred to low paying regions

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 0.5
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© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.
 17-19
Strategic Management of
International Labor Relations (cont.)
 New Labor Force Trends
 Companies are trying to regain lost competitiveness
due to high labor costs
 When national values collide with the realities of global
competition, the latter is likely to win
 Major industrial countries will have to increase
immigration to have the workforce to maintain
economic momentum
 Increased reliance on flexible working arrangements
that contain costs and link work demands with
employees
 Part-Time Work
 Most widely used form of flexibility in Europe

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 17-20
Manufacturing Labor Costs (per unit of output, annual
average percentage change: 1990-1997)
4

Norway

Japan
Canada

Denmark
Belgium
Taiwan

Britain
Germany
Italy
South Korea

United States
France
-1
Sweden

-2

-3

-4

-5
Local currencies

Dollar terms
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 17-21
Strategic Management of
International Labor Relations (cont.)
 New Labor Force Trends (cont.)
 Flexible working arrangements (cont.)
 Shiftwork
 Popular in Europe
 Nonpermanent Employment
 Temporary employees
 Fixed-term contractual agreements
 Subcontracting
 Replace employment contracts with commercial contracts
 Many creative subcontracting approaches
 Organizing International Industrial Relations
 Degree of centralization-decentralization control
 Degree of employment flexibility

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 17-22
A Final Word
 International management will be one of joint
partnerships and agreements
 Virtual corporation
 Network of companies that exploits fast-changing opportunities and
shares costs, skills, and access to global markets
 Theories of international management must be
continually subjected to review
 An important question: “Why some MNCs do better
than others?”
 Strategic fit - aligning resources to match the environment
 Strategic stretch - use of resources to achieve more
challenging goals
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