Contemporary Issues in Employee Relations

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 INTRODUCTION

 Need and Relevance of the change from

‘Industrial Relations’ to ‘Employee Relations’

 Differentiate between ER and IR

 Preconditions for Good Employee relations

management

 Practical Implications of Paradigm shift

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Paradigm Shift
 Gradual Shift at Enterprise Level:

◦ Collective Individual

◦ Containment Creation of Enabling

of Conflict Systems &
Structures

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Drivers for Paradigm Shift
 Changing Political ideologies dictated by concerns for
economic growth

 Trying to achieve sustained competitive advantage

through people

 Changing characteristics of the workforce

 Fast paced changes in technology reducing dependence

on labour

 The declining credibility of unions

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Employer – Employee Relationship
 Individual

 Proactive

 Development Oriented rather than

maintenance driven

 Flexible rather than standardized

 Informal rather than institutionalized

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 Goals of ERM
 Establishing a link and congruency between employee contract
and the employment relationship through a psychological contract

 Terms and conditions of employment to be based on the principle

of fairness and ensuring organizational objectives as well as
individual needs and aspirations are fulfilled

 Developing effective communication channels and systems that

ensure the information needs of employees are met

 Defining and clarifying performance management expectations

and standards to enable employees to strategize

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 Differences in Perspectives
Factors Industrial Relations Employee Relations
Economic Factors Regulating terms & Regulating
conditions performances
Institutional Factors Building relationship Building relationship
with Trade Unions with Employees
Technological Factors Traditional methods of automated methods of
work work
Political factors Dealing with Dealing with the fears
participative collective and insecurities of
bodies individual employees
Social/ Cultural factors NIL
Global factors NIL Global Corporations
Organizational factors NIL Competitive
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Objectives of Employment
Relationships

 What do you want to get out of working?

◦ Money?
◦ Security?
◦ A feeling of accomplishment?
◦ A sense of self-worth?
◦ Something else?

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Objectives of Employment
Relationships
 How do you want to be treated?
◦ Like a machine, or fairly and with respect?
◦ Do you want to be told what to do?
◦ Would you rather have input into the job?

 What do employers want?

◦ High-quality work
◦ Productivity
◦ Team players

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Objectives of Employment
Relationships
 Efficiency
◦ Productive use of scarce resources for economic
prosperity
 Equity
◦ The provision of fair labor standards for both
material outcomes and personal treatment
 Voice
◦ The ability of employees to have meaningful
input into workplace decisions

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Objectives of Employment
Relationships
 Efficiency, equity, and voice often clash
◦ Equitable treatment might reduce flexibility
and efficiency
◦ Employee voice might make decision making more
cumbersome and therefore less efficient
◦ Unions centralize power to better achieve equity,
but become less responsive to individuals

 Labor relations must strike a balance between

these conflicting goals

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Major Components of the
Relationship

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Efficiency
 Efficiency is important to the employment
relationship because of its effect on
◦ Competitiveness
◦ Economic development
◦ Economic prosperity

 Efficiency equals Pareto optimality

◦ No one can be made better off without making
someone else worse off

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Efficiency
 The efficiency of self-interested individuals
exchanging in free markets is fostered by
◦ Well-defined property-rights
◦ The freedom to enter into contracts
◦ Protections against property damage

 These economic and legal theories are

mutually reinforcing

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Market Failure
 An inefficient outcome is a market failure
◦ Trying to correct this failure through government
regulation or subsidies can make things worse

 Labor market “perfect competition”

◦ Employers and employees are economic
and legal equals
◦ Real-world market imperfections can favor
the employer

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Labor Market Failure
 The realities of labor markets
◦ Employees have incomplete information about
dismissal policies, accident risks, or pensions
◦ Individuals without financial resources aren’t
the legal equal of corporations

 Employees are made less mobile by

◦ Labor markets
◦ Unvested pension benefits
◦ Security Issues
◦ Lack of savings or other resources

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Labor Market Failure
 Superior employer bargaining power can
produce
◦ Low wages and long hours
◦ Dangerous conditions
◦ Arbitrary or abusive supervisory practices

 These conditions undermine

◦ Trust
◦ Cooperation
◦ Motivation

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Efficiency in Employment
Relationships

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Equity Standards
 The push for equitable employment focuses
largely on minimum standards
◦ Minimum wages
◦ Maximum hours
◦ Minimum safety standards
◦ Protections against arbitrary discharge
and favoritism
◦ Restrictions on child labor

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Equity
 Equity theory defines fairness in terms of
inputs and outputs or effort and reward
◦ A fair day’s pay for a fair day’s work
◦ Distributive justice

 Other equity factors

◦ Political equality
◦ Social stability
◦ Workplace fairness

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Equity Factors
 Workplace equity can also be based on
◦ Political theories of liberty and democracy
◦ Moral views of human dignity
◦ Humanistic psychology theories of human nature
◦ Religious beliefs about the sanctity of human life

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Sources of Support for Equity
 Democratic Ideals
◦ Discriminatory treatment and a lack of minimum
standards is counter to the ideals of democracy
◦ Citizens should be free and equal
◦ Citizens must have a basic level of material
well-bring to function as political equals
◦ Equal protection
◦ Due process

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Sources of Support for Equity
 Principles of Human Dignity
◦ Paying unfair wages violates Kant’s philosophy that
actions must treat humanity as an end, not
as a means
◦ According to Maslow, the workplace should provide
the basics needed for self-development and
actualization

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Sources of Support for Equity
 Many religions emphasize sanctity of human
life and respect for human dignity
◦ Standards for wages and hours of work
◦ Sick and disability pay
◦ Justice, fairness, and equitable
distribution of wealth
◦ Lack of discrimination or favoritism
◦ Restrictions on child labor

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Voice
 Having meaningful input into decisions

◦ Workers should be able to express unpopular views

without fear of arbitrary treatment
◦ Disagreements should be resolved through fair
dispute resolution procedures
◦ Workers should be able to participate in decision
making, either directly or through representatives

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Voice
 Key Distinctions
◦ Management establishes/controls the collective
voice mechanism for nonunion employees
◦ Unions that represent individual employees
are largely free of managerial authority

 Employee voice is an important part of

◦ Improving competitiveness and quality via
employee involvement programs
◦ Creating high-performance work systems

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Voice
 Benefits of Employee Voice
◦ Formal mechanism for employees to contribute to
productivity-improving ideas
◦ Fulfills need for personal growth and development
◦ Enhances performance through increased job
satisfaction and motivation
◦ Improves two-way communication between
employees and management
◦ Increases cooperation and reduces turnover by
facilitating trust and sense of fairness

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Voice
 Industrial Democracy
◦ Premised on belief that workers are entitled
to democratic participation in the workplace

 Theory versus Reality

◦ The workplace as a school or training ground
for democracy
◦ Work is often undemocratic

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Voice
 Stakeholder Theory
◦ All stakeholders, not just shareholders or owners,
deserve the right to participate in decision making
◦ Not arguing in favor of labor unions

 Voice Perspectives
◦ Moral
◦ Religious
◦ Psychological
◦ Political
◦ Economic

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Isn’t Efficiency Enough?
 Efficiency, measured by profits, is often
the only consideration
◦ Mainstream media has elevated the rights of
consumers over the rights of workers
◦ General belief is “what’s good for a company
is good for the world”
◦ Businesses are not designed to be democratic
training grounds
◦ A company has no obligation to provide
personal and moral development

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Social and Human Boundaries
 Equity and voice are social boundaries
on efficiency
◦ Often quite weak, as with employment-at-will
◦ Lack of just cause discharge protections

 In agrarian and crafts-based societies, quality

of life is linked to property
◦ Modern workers are dependant on jobs, not
property

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Social and Human Boundaries
 Jobs and the Workplace
◦ The most important site of cooperative interactivity
and sociability with adults, outside
of the family
◦ Economic inequality exacerbates social inequalities
in
 Schooling
 Health
 Housing
 Political participation

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Social and Human Boundaries
 Most workers want more influence over
decisions that affect their job or work life
◦ They would enjoy their jobs more
◦ Their businesses would be more competitive

 Managers like to deal with workers 1-on-1

◦ Half of workers prefer dealing with management as a
group

 The Internet and email help workers exercise

their voice

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Unions and Voice
 Unions underscore voice in union literature
and campaigns
◦ Unions overseas also emphasize voice

 Social commentators, labor leaders, and

workers want
◦ Fairly distributed outcomes (equity)
◦ Participation in decision making (voice)
◦ Profitable and effective production of goods and
services (efficiency)

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Pressure for Reform
 Management’s Perspective
◦ Adversarial negotiations do not promote trust
and cooperation
◦ Need to supplement high-level, periodic
negotiations with ongoing low-level communication
and problem-solving mechanism
◦ Lengthy, detailed contracts inhibit flexibility and
involvement
◦ Labor laws are outdated

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Pressure for Reform
 Labor’s Perspective
◦ Labor law is weak
 Penalties are minimal
 Delays are frequent
 Employers can use captive audience speeches and
permanent strike replacements
 Secondary boycotts are prohibited
◦ Private sector union density is less than 10 percent
◦ Workers in the global economy need protection
more than ever

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Declining Union Membership
 Union density has been declining for at least
50 years
◦ Decline in traditionally unionized industries
◦ Regional and demographic shifts
◦ Increased numbers of women in the workforce
◦ Increased education and skill levels

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Declining Union Membership
 Demand for union services has declined

◦ Unions not doing a good job of responding

to the needs of a changing workforce
◦ Employers have improved their responsiveness
to employees’ needs
◦ Increased protective legislation has provided a
substitute for unions

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Declining Union Membership
 Employer Resistance or Opposition

◦ Managers are exceptionally hostile toward unions

◦ Strong tradition of using union avoidance tactics
◦ Failure to invest in unionized plants
◦ Actively fighting organization drives

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Global Snapshot of Labor Relations

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Continued Relevance of Labor
Relations
 Labor relations continues to be a relevant and
dynamic area of study and practice
◦ All managers should understand labor relations
◦ labor laws affect both union and non-union
workplaces
◦ Reveals consequences of poorly managed
workforces
◦ Explains historical, social, and political influences
on business
◦ Helps everyone understand and resolve conflict
◦ Reveals how work and business are embedded in
a complex environment

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Continued Relevance of Labor
Relations
 Labor relations involves diverse factors
◦ Market forces
◦ Managerial strategies
◦ Forms of work organization
◦ Constitutional and legal issues
◦ History
◦ Questions of human rights
◦ Negotiation and conflict resolution strategies
◦ Debates over globalization
◦ Ethical challenges

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Continued Relevance of Labor
Relations
 Underlying labor relations issues
◦ Goals of the employment relationship
◦ How labor markets operate
◦ Major environmental pressures
◦ Union strategies
◦ Public policy

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