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Introduction
Employment relations are the most complex issue in modern organizations. Conducting employment relations within an organization requires significant cooperation from management because of the staff time and coordination involved. Desirable, if feasible, is a preliminary consultation with the responsible managers to explain how a focus group works and to answer questions as to why things are done as they are. The purpose of this consultation is to achieve a meeting of minds, a mutual understanding of the problems of management, and the potential of employment relations for addressing those problems. Managers and business owners should not exercise their managerial prerogative without interference from the other actors in the employment relationship because it will violate the rights of employees and threaten their freedoms.
Main body
The state and trade unions protect employees from exploitation and unfair policies. Workers can address job issues with their employer through direct communication to bring actual and desired conditions closer together. The voice mechanism is superior to the exit one because, as firms address the concerns of their existing labor force, workers are more likely to remain with the firm. There is less turnover of skilled employees, reducing the cost of hiring and training new employees. Skills (firm-specific human capital, to put it technically) are preserved, and indeed, enhanced insofar as firms find it economically feasible to offer more training to the stable workforce (Baird, 2003). A collective voice—workers communicating with management as a group—is also superior to individual efforts to communicate with employers. The power imbalance between employers and employees, and an individuals’ inability to establish readily enforceable agreements with employers restrict the effectiveness of individual voice. Provision of binding rules for promotion and due process, commonly associated with trade unions, can increase efficiency. Without such arrangements, workers will hoard knowledge to provide job security and increase opportunities for promotion. With enforceable arrangements for seniority and due process, workers will be more willing to share production knowledge, increasing efficiency (Holland et al 2000). A collective voice is also more effective for addressing problems with common working conditions. Many conditions at a worksite cannot be changed without affecting all employees at the site. Employers are unlikely to respond to individual requests for change but will respond to requests by the majority of workers. By compelling employees to develop shared priorities, collective voice relieves the employer of making decisions which would lead to discontent were the workers themselves not involved in making the tough tradeoffs.
Unions may also direct management into more efficient production. Firms may not use labor efficiently when the costs of inefficiency seem small. When firms are organized, the new work environment and higher labor costs lead firms to restructure and become more businesslike. Firms may hire better managers, improve the training of supervisors, and implement production standards along with monitoring and review processes. As with voice, unionization is associated with increased productivity, but the effect on costs and profits is ambiguous (Holland et al 2000). This ambiguity is reinforced in situations in which unions lower some costs at the same time that they raise others. Employers of short-term labor must constantly recruit and screen employees. There are usually no quick means for informing potential employees when work is available and no method (other than trial and error) to determine if employees have requisite skills (Baird, 2003). Unions, notably those in construction, reduce these costs through hiring halls and apprenticeship programs. Hiring halls, along with other means of disseminating information on jobs outside of local labor markets, allow contractors to assemble the crews rapidly. Ready access to skilled labor also reduces the need to carry large crews through periods of slack work. By assuring a minimum level of competence, apprenticeship programs reduce contractors’ screening and training costs. The relationship between unions and firm performance may be influenced by the industrial relations climate (Baird, 2003). The structure of bargaining, the history of labor-management relations, the environment in which firms and employees operate, and the consequent attitudes of labor and management affect firm performance. In plants and firms in which there is little trust between employers and employees, in which production workers are largely excluded from decisions affecting them, and in which there is ongoing conflict over the boundary between subjects of bargaining and those under unilateral managerial control, there will be little incentive for workers and managers to share information, workers will only produce under compulsion, and the rules of the work site—originating from conflict—will be used to assert or limit control rather than improve output (Holland et al 2000). In contrast, in environments in which there is high trust, where employees and their unions are integrated into the decision process, and in which the parties accept the legitimacy of one another’s goals, productivity gains, and cost reduction can be realized through creative bargaining, cooperation in the development of better production techniques, and a reduction in the use of restrictive work practices and monitoring (Abbott, 2007).
Since its founding, the labor movement’s drive for higher wages has been accompanied by demands for shared control of decisions that affect labor. In the organized workplace, these demands have been translated into detailed rules regulating the labor process. While most of the rules address promotion, discipline, production standards, working rules, and contract enforcement, labor has also established the right to discuss decisions that affect employees (Parkinson 1993). These rules provide substantial control over the production process and are the foundation of bilateral decision-making in organized worksites. In contrast, nonunion employees have limited control over production decisions. Although afforded rights by law, these are restricted in scope and enforceability. Informal shop floor organization may also provide limited control over the immediate worksite. Largely unbound by the type of rules faced by organized employers, nonunion management has greater latitude in decision-making. Unions and the state may, by providing employees with greater security, protecting them against arbitrary actions, improving communications between managers and workers, and compelling firms to adopt better management practices, be a source of increased productivity and have little or no influence on costs or profits (Winter and Jackson 2006). Until recently, discussion of these issues has been based on case studies and anecdotal information; neither side was convinced by the arguments and information brought forward by the other. Unit trusts in Australia are open-ended investment funds as in the UK (Baird, 2003).
The debate has been widened by attempts to measure the relationship between unions and productivity. These are predominantly derived from estimates of production functions. These functions specify a relationship between inputs (including labor and capital) and output (Winter and Jackson 2006). The rearrangement of the production function makes labor productivity (the ratio of output to labor input) a function of factors such as the capital to labor ratio, firm and industry structure, and union penetration. Unionization (the proportion of employees belonging to or represented by a union) is the typical measure of union bargaining power and other relevant dimensions of labor relations. Other variables, such as the capital to labor ratio, measures of firm and industry structure, and labor quality control for additional forces influencing productivity. Such controls are needed to obtain unbiased estimates of the effect of unions (Bray and Waring 2006).
The tenor of relations between labor and management varies widely by firm and industry. It is not unprecedented to have both prolonged industrial warfare and cooperative efforts within the same industry (Winter and Jackson 2006). Multiple factors (worker and management attitudes, the structure of bargaining, the goals and strategies of the parties, the organization of work, the history of conflict resolution) mediate the relation between unions, their members, and firm performance. In their role as an employee representatives, unions can inform members about new programs, encourage open discussion, and obtain commitment to change. In their other role as opposition to management authority, unions can hamper the implementation of management programs (Tsui and Wu 2005). The firm performance will be greatly influenced by the role taken by a union (Bray and Waring 2006). There is evidence of linkages between the availability of grievance arbitration and factors known to have a beneficial effect on productivity.
Conclusion
In sum, initially introduced to address ongoing problems such as safety conditions and employee dissatisfaction, these programs are currently touted as a method of increasing productivity, raising quality, and lowering costs. These programs do not appear to resolve fundamental differences between the interests of labor and management. Rather, they provide new means to address these differences. By raising the level of trust in the workplace, they provide a foundation for a cooperative (problem-solving) approach to differences and conflicts. Thus, the programs improve the effectiveness of the industrial relations system and the economic performance of the firm Grievance/arbitration procedures provide an orderly means of communicating and resolving industrial discord between employers and employees. Where these procedures are available, levels of conflict should be lower and the employment relationship more productive. In their absence, alternative means of resolving disputes, exits by individuals, and job actions by workgroups are disruptive and costly.
References
Abbott, K. (2007). Employment Relations: Integrating Industrial Relations and Human Resource Management. Problems and Perspectives in Management. Sumy: 5 (1), 61-73.
Baird, M. (2003). Paid Maternity Leave. Paid maternity leave: The good, the bad, the ugly. Marian Australian Bulletin of Labour; 29 (1), pp. 97-98.
Bray, M., Waring, P. (2006). The Rise of Managerial Prerogative under the Howard Government. Australian Bulletin of Labor; 32 (1), pp. 45-47.
Holland, P. Nelson, L., Fisher, C. (2000). Australian trade unions responses to human resource management: An analysis of Greenfield sites. Management Research News. 23 (2-4), p. 36-41.
Lafferly, G., Roan, A. (2000). Public sector outsourcing: implications for training and skills. Employee Relations. 22 (1), p. 76.
Parkinson J. E. (1993). Corporate Power and Responsibility. Clarendon Press, Oxford.
Tsui, A. S., Wu, J. B. (2005). The New Employment Relationship versus the Mutual Investment Approach. Human Resource Management, 44 (2), pp. 115–121.
Winter, R., Jackson, B. (2006). State of the psychological contract; Manager and employee perspectives within an Australian credit union. Employee Relations. Bradford: 28 (5), p. 421.
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