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Human Resources/INDUSTRIAL RELATIONS

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Question
“Success of any industry in India is possible only by the effective union-management relationship” – Comment on this statement with appropriate example.

Answer
The objectives of managements, the ways in which enterprises are managed to achieve these
objectives and the human resource management (hereinafter referred to as "HRM") and
industrial relations (hereinafter referred to as "IR") initiatives in this regard, are affected by
pressures, many of which are exerted by globalization. Changes in IR practices (rather than in
institutions and systems) such as increased collective bargaining at enterprise level, flexibility
in relation to forms of employment as well as in relation to working time and job functions
have occurred as a result of such factors as heightened competition, rapid changes in products
and processes and the increasing importance of skills, quality and productivity. These factors
have also had an impact on HRM policies and practices. In managing change, the key elements
include employee involvement in effecting change, greater customer orientation, and ensuring
that the skills of employees are appropriate to the production of goods and the provision of
services acceptable to the global market. As such, managing people in a way so as to motivate
them to be productive is one important objective of HRM. The implications and consequences
of globalization include the following:
1. Countries are more economically interdependent than before, particularly in view of
foreign direct investment interlocking economies, as well as increased free trade. The
inability of economies to be 'self-sufficient' or 'self-reliant' or 'self-contained' has been
accompanied by a breakdown of investment and trade barriers.
2. Governments are increasingly less able to control the flow of capital, information and
technology across borders.
3. There has been de-regulation of financial and other markets, and the integration of
markets for goods, services and capital such as the European Community.
4. It has led to the de-nationalization of enterprises and the creation of global companies
and global webs.
5. Production of goods and services acceptable to the global market, and the convergence,
to a great extent, of customer tastes across borders determined by quality.
6. The need to achieve competitiveness and to remain competitive in respect of attracting
investment, goods and services. This means, inter alia, the necessity for high quality
skills at all levels to attract high value-added activities, as distinct from cheap labour
low value-added ones, and improvements in productivity.
Enterprises driven by market pressures need to include in their goals improved quality and
productivity, greater flexibility, continuous innovation, and the ability to change to respond
rapidly to market needs and demands. Effective HRM is vital for the attainment of these goals.
Improved quality and productivity linked to motivation can be achieved through training,
employee involvement and extrinsic and intrinsic rewards. The growing interest in pay systems
geared to performance and skills reflects one aspect of the increasing significance of HRM in
realizing management goals and a gradual shift from collectivism to the individualisation of
pay. In such pay systems a critical attraction is the possibility of achieving these goals without
increasing labour costs but at the same time increasing earnings. Realizing management goals
and managing change need employee involvement, commitment and training, employee
participation, cooperation and team-work - all important HRM initiatives and activities. The
dominant position towards which HRM is moving points to a
"change in power relations and highlights the supremacy of management. The
management prerogative is rediscovered but in place of command and control
the emphasis is on commitment and control as quality, flexibility and
competence replaces quantity, task and dumb obedience. To put it another way:
the managerial agenda is increasingly focused on innovation, quality and cost
reduction. Human resource management makes more demands on employees,
work is intensified .... there is less room for managerial slack and for indulgency
patterns."1
From a purely HRM perspective, one writer2 has
identified the following six factors as
accounting for the increasing interest in and resort to HRM practices:
a. Improving the management of people or utilizing human resources better as a means of
achieving competitive advantage.
b. The numerous examples of excellence in HRM have created an interest in such models.
c. The traditional role of personnel managers has failed to exploit the potential benefits of
effective management of people; neither did personnel management form a central part
of management activity.
d. In some countries the decline of trade union influence has opened the way for
managements to focus on more individual issues rather than on collectivist ones.
e. The emergence of better educated workforces with higher individual expectations,
changes in technology and the need for more flexible jobs have, in turn, created the
need to incorporate HRM into central management policy.
f. Many important aspects of HRM such as commitment and motivation emanate from the
area of organizational behaviour, and place emphasis on management strategy. This has
provided an opportunity to link HRM with organizational behaviour and management
strategy.
\
When identifying some of the trends in HRM and when subsequently analysing how they
could contribute to achieving management objectives, it is necessary to voice a note of caution.
The fact that one elaborates on an ideal model of HRM does not mean that such models have
been widely adopted in the real corporate world.3 As Thomas A Kochan and Lee Dyer point
out, "even today we find that the human resource function within many American corporations
remains weak and relatively low in influence relative to other managerial functions such as
finance, marketing, and manufacturing ... despite the outpouring of academic writing on
'strategic human resource management' little progress has been made in developing systematic
theory or empirical evidence on the conditions under which human resources are elevated to a
position where the firm sees and treats these issues as a source of competitive advantage."4 The
'best practice' models are really the exceptions, but their value is that they, in a sense, prove the
rule, so to speak. Absence of widespread practice is no argument against such a model, but is
rather a reason to advocate it, in the same way that the absence of a harmonious IR system in a
given situation or country is no argument against advocating it. However, it is possible that the
various pressures on enterprises in the 1990s will result in increased resort to effective HRM
policies and practices. In the ultimate analysis, HRM and IR are about how people are treated,
and their relevance increases where an enterprise takes a long-term view, rather than a shortterm
one, of what it wants to achieve. Two writers, after examining some of the successful
companies such as IBM, GE, Hewlett Packard and Matsushita, observe that
"there are a series of things concerned with corporate objectives and culture that
seem to matter. Agreement on basic directions for the long-term development of
the business, and on how to treat people within the firm, are perhaps the most
essential common features of these companies."5
The increasingly significant role of HRM in achieving management objectives is reflected in
the transformation of the personnel management function. Over the last two decades this
function was often marginalized in terms of its importance in management activities and
hierarchy. It has evolved from a concentration on employee welfare to one of managing people
in a way so as to obtain the best and highest productivity possible from the employee, through
methods that provide the employee with both intrinsic and extrinsic rewards.6 Therefore today
"far from being marginalised, the human resource management function
becomes recognized as a central business concern; its performance and delivery
are integrated into line management; the aims shift from merely securing
compliance to the more ambitious one of winning commitment.

The employee
resource, therefore, becomes worth investing in, and training and development
thus assume a higher profile. These initiatives are associated with, and maybe
are even predicated upon, a tendency to shift from a collective orientation to the
management of the workforce to an individualistic one. Accordingly
management looks for 'flexibility' and seeks to reward differential performance
in a differential way. Communication of managerial objectives and aspirations
takes on a whole new importance."7
What separates or distinguishes HRM from the traditional personnel function is the integration
of HRM into strategic management and the pre-occupation of HRM with utilizing the human
resource to achieve strategic management objectives. HRM "seeks to eliminate the mediation
role and adopts a generally unitarist perspective. It emphasizes strategy and planning rather
than problem-solving and mediation, so that employee cooperation is delivered by programmes
of corporate culture, remuneration packaging, team building and management development for
core employees, while peripheral employees are kept at arms"length."8
HRM strategies may be influenced by the decisions taken on strategy (the nature of the
business currently and in the future) and by the structure of the enterprise (the manner in which
the enterprise is structured or organized to meet its objectives)9. In an enterprise with effective
HRM policies and practices, the decisions on HRM are also strategic decisions influenced by
strategy and structure, and by external factors such as trade unions, the labour market situation
and the legal system. In reality most firms do not have such a well thought-out sequential
model. But what we are considering here is effective HRM, and thus a model where HRM
decisions are as strategic as the decisions on the type of business and structure.
At a conceptual level the interpretations of HRM indicate different emphases which lead to
concentration on different contents of the discipline. The various distinctions or interpretations
indicate that HRM
"can be used in a restricted sense so reserving it as a label only for that approach
to labour management which treats labour as a valued asset rather than a
variable cost and which accordingly counsels investment in the labour resource
through training and development and through measures designed to attract and
retain a committed workforce. Alternatively, it is sometimes used in an
extended way so as to refer to a whole array of recent managerial initiatives
including measures to increase the flexible utilization of the labour resource and
other measures which are largely directed at the individual employee. But
another distinction can also be drawn. This directs attention to the 'hard' and
'soft' versions of HRM. The 'hard' one emphasizes the quantitative, calculative
and business-strategic aspects of managing the headcounts resource in as
'rational' a way as for any other economic factor. By contrast, the 'soft' version
traces its roots to the human-relations school; it emphasizes communication,
motivation, and leadership."10
There are several ways in which HRM has changed earlier attitudes and assumptions of
personnel management about managing people.11 The new model of HRM includes many
elements vital to the basic management goal of achieving and maintaining competitiveness.
First, HRM earlier reacted piece-meal to problems as they arose. Effective HRM now
increasingly seeks to link HRM issues to the overall strategy of the organization. Organizations
with the most effective HRM policies and practices seek to integrate such policies in corporate
strategies and to reinforce or change an organization's culture. Integration is needed in two
senses -integrating HRM issues into an organization's strategic plans and securing the
acceptance and inclusion of a HRM view in the decisions of line managers. The HRM policies
in respect of the various functions (e.g. recruitment, training, etc.) should be internally
consistent. They must also be consistent with the business strategies and should reflect the
organization's core values12. The problem of integrating HRM with business strategy13 arises,
for example, in a diversified enterprise with different products and markets. In such cases there
is the difficulty of matching HRM policies with strategies which could vary among different
business activities, each of which may call for different HRM policies. For instance, in
particular cases "the 'hard' version of human resource management appears more relevant than
the 'soft' version of human resource management. In other words, matching HRM policies to
business strategy calls for minimizing labour costs, rather than treating employees as a resource
whose value may be enhanced .... by increasing their commitment, functional flexibility, and
quality."14 This contradiction is sometimes sought to be resolved through the claim that
developing people is possible only where the business is successful. Therefore if reducing the
labour force or dispensing with poor performers is dictated by business conditions, resorting to
such measures and treating people as a resource are not antithetic. Another reconciliation of
this contradiction is sought through management initiatives to change business strategy (e.g. in
sectors where reducing costs is a common practice such as in mass production and supermarket
retailing) through greater employee involvement, commitment and training.
Second, building strong cultures is a way of promoting particular organizational goals, in that
"a 'strong culture' is aimed at uniting employees through a shared set of managerially
sanctioned values ('quality', 'service', 'innovation', etc.) that assume an identification of
employee and employer interests."15 However, there can be tension between a strong
organizational culture and the need to adapt to changed circumstances and to be flexible,
particularly in the highly competitive and rapidly changing environment in which employers
have to operate today. Rapid change demanded by the market is sometimes difficult in an
organization with a strong culture. IBM has been cited as a case in point. Its firmly-held beliefs
about products and services made it difficult to effect change in time, i.e. when the market
required a radical change in product and service (from mainframe, customised systems,
salesmen as management consultants to customer-as-end user, seeking quality of product and
service) to personal computers (standardized product, cost competition, dealer as customer).16
Nevertheless in the long term a strong organizational culture is preferable to a weak one:
"Hence it could be said that the relationship between 'strong' cultures, employee
commitment, and adaptability contains a series of paradoxes. Strong cultures
allow for a rapid response to familiar conditions, but inhibit immediate
flexibility in response to the unfamiliar, because of the commitment generated
to a (now) inappropriate ideology. 'Weak' cultures, in contrast, when equated
with ambiguous ideologies, allow flexibility in response to the unfamiliar, but
cannot generate commitment to action. Yet strong cultures, through
disconfirmation and eventual ideological shift may prove ultimately more
adaptive to change, assuming the emergence of a new strong yet appropriate
culture. This may be at the cost of a transitional period when ability to generate
commitment to any course of action -new or old - is minimal."17
Third, the attitude that people are a variable cost is, in effective HRM, replaced by the view
that people are a resource and that as social capital can be developed and can contribute to
competitive advantage. Increasingly, it is accepted that competitive advantage is gained
through well-educated and trained, motivated and committed employees at all levels. This
recognition is now almost universal, and accounts for the plausible argument that training and
development are, or will be, the central pillar of HRM. By the end of the 1980s leading
companies in Germany, Japan and the USA were spending up to 3% of turnover on training
and development, but in the UK such expenditure amounted to only about 0.15%.18 The
economic performance of some of the East Asian countries (Japan, Korea, Hong Kong and
Taiwan) and of some of the South East Asian countries (Singapore and Malaysia) are
intimately connected with their high level of investment in education and training. Other
countries are now placing human resource development at the centre of their national strategic
plans - Indonesia being a recent example. Thus
"The existence of policies and practices designed to realize the latent potential
of the workforce at all levels becomes the litmus test of an organization's
orientation."19
Fourth, the view that the interests of employees and management or shareholders are divergent
and conflictual - though substantially true in the past - is giving way to the view that this need
not necessarily be so. HRM seeks to identify and promote a commonality of interests.
Significant examples are training which enhances employment security and higher earning
capacity for employees and which at the same time increases the employee's value to the
enterprise's goals of better productivity and performance; pay systems which increase earnings
without significant labour cost increases, and which at the same time promote higher
performance levels; goal-setting through two-way communication which establishes unified
goals and objectives and which provides intrinsic rewards to the employee through a
participatory process.
Fifth, top-down communication coupled with controlled information flow to keep power within
the control of management categories is gradually giving way to a sharing of information and
knowledge. This change facilitates the creation of trust and commitment and makes knowledge
more productive. Control from the top is being replaced by increasing employee participation
and policies which foster commitment and flexibility which help organizations to change when
necessary. The ways in which the larger Japanese enterprises have installed participatory
schemes and introduced information-sharing and two-way communication systems are
instructive in this regard.
In enterprises which tend to have corporate philosophies or missions, and where there are
underlying values which shape their corporate culture, HRM becomes a part of the strategy to
achieve their objectives. For example, in Matsushita Electric Company "finance, personnel and
training are all fully centralised .... Personnel and training exist to create 'harmony' In other
words the central role of these functions is to help build and maintain the Matsushita culture
....people are seen as the critical resource."20 In some types of enterprises such as ones in which
continuous technological change takes
place, the goal of successfully managing change at short intervals often requires employee
cooperation through emphasis on communication and involvement. As this type of unit grows,
"If there is strategic thinking in human resource management these units are
likely to wish to develop employee-relations policies based on high
individualism paying above market rates to recruit and retain the best labour,
careful selection and recruitment systems to ensure high quality and skill
potential, emphasis on internal training schemes to develop potential for further
growth, payment system designed to reward individual performance and
cooperation, performance and appraisal reviews, and strong emphasis on team
work and communication ... In short, technical and capital investment is
matched by human resource investments, at times reaching near the ideals of
human resource management."21
If, as is often the case, (the UK is a good example22), enterprises are dominated by financial
issues, HRM will not be a part of the central strategy of such enterprises.
HRM as a means of achieving management objectives - at least in enterprises which have
recognized, or have been compelled to recognize, the utilization of the human resource in
achieving competitive edge - becomes clear from an examination of four important goals of
effective HRM.23 HRM is closely linked to motivation, leadership and work behaviour. An
enterprise's policies and practices in these areas have an impact on whether HRM contributes
to achieving management goals.
The first goal of HRM is integration, which in itself has four aspects. Although "a
comprehensive corporate strategy is essential to continuing business success ... in many cases,
human resource planning is not an integral part of strategic planning, but rather flows from
it"24, so that giving effect to strategic plans becomes more difficult. This is especially so in
today's context when the success of the process of adapting to change requires an increasing
degree of individual and group involvement, so that human resources need to be integrated into
strategic plans. As has been aptly stated in regard to managing change:25
"Corporate entrepreneurs - single-minded individuals that they are - still get
their projects done by crafting coalitions and building teams of devoted
employees who feel a heightened sense of joint involvement and contribution to
decisions. The integrative, participative vehicles surrounding innovators - open
communication, interdependent responsibilities, frequent team efforts- keep
them close to the power sources they need to operate, ensuring access to
information, resources and the support needed for implementation. Involving
grass roots employees on participative teams with control over their own
outcomes helps the organization to get and use more ideas to improve
performance and increase future skills. Whether called 'task forces', 'quality
circles', 'problem-solving groups', or 'shared-responsibility teams', such vehicles
for greater participation at all levels are an important part of an innovating
company. Masters of change are also masters of the use of participation."
Human resource policies should also be internally consistent in the sense that policies in each
area of human resources (e.g. selection, motivation, rewards) should further common strategic
objectives. Further, successful integration depends on line managers accepting and practising
the appropriate HRM policies. Moreover, employees should be integrated (as in the case of the
best practice in Japanese companies) so that there is as little divergence of interests between
those of the enterprise and the employee.
The second is the goal of commitment, which involves identification of the type of
commitment sought e.g. attitudinal, behavioural.26 Commitment could be to the organization,
to the job, to career advancement. Commitment could be seen as acceptance of enterprise
values and goals, and could be reflected in behaviour which seeks to further these goals. Thus:
"The theoretical proposition is therefore that organizational commitment,
combined with job related behavioural commitment will result in high employee
satisfaction, high performance, longer tenure and willingness to accept
change."27
Among measures to achieve commitment are setting objectives through a two-way
communication process which requires consultation and involvement; performance appraisal
systems based on agreed goals and performance measures; intrinsic and extrinsic rewards.
The third is the goal of flexibility and adaptability, which in essence means the ability to
manage change and innovation and to respond rapidly to market demands and changes. This
requires a HRM policy which is conducive to change at all levels of the organization, a
structure which is not bureaucratic, rigid and hierarchical, with an absence of rigid job
demarcations and with functional flexibility (flexible skills and willingness to move from one
task to another). Promoting these is possible only "if employees at all levels display high
organizational commitment, high trust and high levels of intrinsic motivation."28 Measures to
achieve flexibility would include training, work organization, multi-skilling and removal of
narrow job classifications.




The fourth goal of HRM is the goal of quality. This assumes the existence of policies and
practices to recruit, develop and retain skilled and adaptable staff, and the formulation of
agreed performance goals and performance measures. To these goals could be added two
broader goals - building a unified organizational culture and achieving competitive advantage
through the productive use of human resources.

In considering the relationship between HRM and IR, two central concerns are: in what way
does HRM pose a challenge to IR and how can conflicts between the two, if any, be reconciled
so that they can complement each other? This section concerns itself with the first of these two
issues. In considering the issue, it is necessary to identify the broad goals of each discipline.
The goals of HRM have already been identified in the previous section. It remains to consider
some of the basic objectives of IR, which could be said to include the following:
1. The efficient production of goods and services and, at the same time, determination of
adequate terms and conditions of employment, in the interests of the employer,
employees and society as a whole, through a consensus achieved through negotiation.
2. The establishment of mechanisms for communication, consultation and cooperation in
order to resolve workplace issues at enterprise and industry level, and to achieve
through a tripartite process, consensus on labour policy at national level.
3. Avoidance and settlement of disputes and differences between employers, employees
and their representatives, where possible through negotiation and dispute settlement
mechanisms.
4. To provide social protection where needed e.g. in the areas of social security, safety and
health, child labour, etc.
9
5. Establishment of stable and harmonious relations between employers and employees
and their organizations, and between them and the State.
IR is essentially pluralistic in outlook, in that it covers not only the relations between employer
and employee (the individual relations) but also the relations between employers and unions
and between them and the State (collective relations). IR theory, practice and institutions
traditionally focus more on the collective aspect of relations. This is evident from the central
place occupied by labour law, freedom of association, collective bargaining, the right to strike,
employee involvement practices which involve unions, trade unionism and so on. HRM deals
with the management of human resources, rather than with the management of collective
relations. There is of course a certain measure of overlap. Individual grievance handling falls
within the ambit of both disciplines, but dispute settlement of collective issues more properly
falls within the scope of IR. Policies and practices relating to recruitment, selection, appraisal,
training and motivation form a part of HRM. Team-building, communication and cooperation,
though primarily HRM initiatives, have a collectivist aspect. Thus joint consultative
mechanisms are as much IR initiatives, which may (as in Japan) supplement collective
bargaining. But IR has not, in regard to team-building for instance, developed any techniques
or theories about how to achieve it; in fact, it is not a focus of attention because it implies a
potential loyalty to the enterprise through the team and is seen as conflicting with loyalty to the
union. IR has a large component of rules which govern the employment relationship. These
rules may be prescribed by the State through laws, by courts or tribunals, or through a bipartite
process such as collective bargaining. HRM differs in this respect from industrial relations in
the sense that it does not deal with such procedures and rules, but with the best way to use the
human resource through, for example, proper selection and recruitment, induction, appraisal,
training and development, motivation, leadership and intrinsic and extrinsic rewards. Thus "at
its most basic HRM represents a set of managerial initiatives."29 Four processes central to a
HRM system - selection, appraisal, rewards and development30 - leave only limited room for
IR as a central element in the human resource system. "Based on theoretical work in the field
of organizational behaviour it is proposed that HRM comprises a set of policies designed to
maximise organizational integration, employee commitment, flexibility and quality of work.
Within this model, collective industrial relations have, at best, only a minor role."31
A discernible trend in management is a greater individualisation of the employer-employee
relationship, implying less emphasis on collective, and more emphasis on individual relations.
This is reflected, for instance, in monetary and non-monetary reward systems. In IR the central
monetary reward is wages and salaries, one of its central themes (given effect to by collective
bargaining) being internal equity and distributive justice and, often, standardisation across
industry. HRM increasingly places emphasis on monetary rewards linked to performance and
skills through the development of performance and skills-based pay systems, some of which
seek to individualise monetary rewards (e.g. individual bonuses, stock options, etc.). HRM
strategies to secure individual commitment through communication, consultation and
participatory schemes underline the individualisation thrust, or at least effect, of HRM
strategies. On the other hand, it is also legitimate to argue that HRM does not focus exclusively
on the individual and, as such, does not promote only individual employment relations. Though
much of HRM is directed at the individual,
"at the same time there is a parallel emphasis on team work, whether in the form
of quality circles or functional flexibility, and above all, on the individual's
commitment to the organization, represented not just as the sum of the
individuals in it, but rather as an organic entity with an interest in survival. The
potential conflict between emphasizing the importance of the individual on the
one hand, and the desirability of cooperative team work and employee
commitment to the organization, on the other, is glossed over through the
general assumption of unitarist values ..: HRM stresses the development of a
strong corporate culture -not only does it give direction to an organization, but it
mediates the tension between individualism and collectivism, as individuals
socialised into a strong culture are subject to unobtrusive collective controls on
attitudes and behaviour."32
Some of the tensions between IR and HRM arise from the unitarist outlook of HRM (which
sees a commonality of interests between managements and employees) and the pluralist
outlook of IR (which assumes the potential for conflict in the employment relationship flowing
from different interests). "It is often said that HRM is the visual embodiment of the unitarist
frame of reference both in the sense of the legitimation of managerial authority and in the
imagery of the firm as a team with committed employees working with managers for the
benefit of the firm."33 How to balance these conflicting interests and to avoid or to minimize
conflicts (e.g. through promotion of negotiation systems such as collective bargaining, joint
consultation, dispute settlement mechanisms within the enterprise and at national level in the
form of conciliation, arbitration and labour courts) in order to achieve a harmonious IR system
is one central task of IR. The individualization of HRM, reflected in its techniques which focus
on direct employer-employee links rather than with employee representatives, constitutes one
important difference between IR and HRM. It has been observed that:
"The empirical evidence also indicates that the driving force behind the
introduction of HRM appears to have little to do with industrial relations; rather
it is the pursuit of competitive advantage in the market place through provision
of high-quality goods and services, through competitive pricing linked to high
productivity and through the capacity swiftly to innovate and manage change in
response to changes in the market place or to breakthroughs in research and
development ... Its underlying values, reflected in HRM policies and practices,
would appear to be essentially unitarist and individualistic in contrast to the
more pluralist and collective values of traditional industrial relations."34
How does HRM more specifically challenge IR and trade unions, though HRM is not per se
anti-union and its central themes are not necessarily inconsistent with unionism ? First, HRM
does not focus, as does IR, on collective bargaining, which is a central institution in IR.
However, collective bargaining should not be understood only in the narrow sense of
negotiation of terms and conditions of employment leading to a formal agreement. It should be
viewed as a process, and as including all mechanisms introduced to arrive at a consensus on
matters affecting the two social partners, even if they do not result in formalised agreements. If
viewed in this way, it reduces the conflict between HRM and IR within this area. A second
area in which HRM is said to pose a challenge to unions is on the issue of flexibility- critical in
HRM but traditionally absent as a factor in IR where a degree of standardisation for purposes
of internal equity has been an objective of unions and of IR. Here the scene is undergoing
considerable change. There is today a major thrust towards achieving flexibility in the labour
market on matters such as functions, working time, pay and types of contracts. Unions are
being compelled to 'participate' in these changes as an alternative to being marginalized. The
trend towards greater decentralization of collective bargaining has compelled viewing issues
more from a workplace perspective. It has provided an opportunity for unions in countries with
a high rate of unionization to be involved in issues other than wages and related ones, such as technology introduction, new work processes and organization, It involves, on the one hand,
the willingness of employers to deal with unions on such matters (which they have to be
willing to do in high union-density enterprises), and on the other the willingness of unions
illing to do in high union-density enterprises), and on the other the willingness of unions to
cooperate on legitimate measures to achieve competitiveness -especially where the employees
themselves are willing to do so -and to adapt to the realities of the workplace.
A third - and perhaps the principal challenge - emanates from employee loyalty and
commitment, which are central objectives of HRM. The issue here is whether dual allegiance is
possible i.e. commitment to the goals and values of the organization, and to contribute to its
success on the one hand, and commitment to the trade union on the other. It is at this point that
IR becomes a critical factor. In principle there should be no antithesis, because trade unionism
need not (and should not) be conflictual in approach and attitude. Much of the empirical
evidence drawn from the USA indicates that in a workplace with a cooperative IR system dual
loyalty is possible, but that it is not possible in one where a cooperative climate is absent or
minimal.35 In some of the larger unionised corporations in Japan, this conflict of loyalty is less
felt.
Traditional IR and trade unionism can be challenged in other ways - that is, other than through
anti-union activity. Downsizing the labour force as a HRM initiative to achieve
competitiveness and offering monetary incentives to employees to improve productivity could
create IR tensions, especially if the union has not been involved in the process. A similar result
may occur when an employer, without seeking to dismantle existing IR practices, establishes
other mechanisms and practices such as direct communication and consultation systems, small
group activities, employee share option schemes and so on without involving the union.
The unitarist approach of HRM and the pluralist tradition of IR, though regarded by some as
incompatible, are not regarded in the same light by others. There are three issues involved here.
The first is whether the pursuit of HRM policies such as employee involvement and
commitment, two-way communication and small group activities, and the integration of HRM
policies in corporate objectives and strategies pose a challenge to central IR institutions such as
collective bargaining and to unionism. The second is whether such HRM policies are pursued
consciously as a union avoidance strategy. The third is whether HRM and IR are necessarily
incompatible or whether there is scope for their co-existence.
David E. Guest36 points out that HRM, which is an American concept, "finds its fullest
expression in a number of well-known and successful American companies." He points out that
research indicates that the established model of HRM is often found in a non-union company.
Referring to the research done by one writer,37 he states38:
"He notes that in almost all the companies he looked at the HRM policies came
first, often encouraged by the values of a powerful CEO, preceding any
considered non-unionism. In many cases, remaining non-union has
subsequently become a policy goal. On the basis of the companies he studied,
this has a number of cost implications. Personnel policies must be sufficiently
good and sufficiently integrated and reinforced by line management practice to
avoid giving grounds for union organising. Foulkes found that most of the
companies he studied paid above average rates. They also provided mechanisms
for individual expression of grievances and were likely to monitor reactions to
personnel policies through the communication system and the use of attitude
surveys. All of these practices are to be found in a company like IBM which  provides the best known model of HRM but which is also what Bassett39 refers
to as the 'ultimate non-union company'."
This does not mean that HRM is anti-union or that unions have no role to play in HRM, but
rather that effective HRM policies and practices are sometimes either used as a union
avoidance strategy or else it can have that effect. Three very influential scholars40 have put
forward the view that there is a role for union involvement in HRM, and point to companies
(such as the General Motors Saturn plant) which have involved unions in the move towards
HRM, and by so doing unions have facilitated this move. Such an involvement, if it is to take
place, would require, in many countries, a substantial change of attitude on the part of both
management and unions. however:
"If a new set of practices can be introduced, it is not clear what role is left for
the union. The most likely one is that of policing management practices and
dealing with grievances which seem almost inevitable with repetitive production
line work and persisting pressures to increase productivity. By implication,
management is not practising effective HRM and the door is left open for the
unions to play a role."
At the annual meeting of European employers' organizations, held in Bordeaux in 1993 the
compatibility of new trends in HRM with the traditional IR systems was considered. The
following summary42 is indicative of the growing attitude of employers in many industrialized
market economies:
"The key to competitiveness is quality. And quality depends more on the
commitment of individuals than on their acquired technical skills; more on the
way these individuals behave and their team spirit than on the passive execution
of orders received. Regulations - be they internal to the enterprise or imposed by
the legislator - plague innovation and have a negative effect on motivation.
Good human resource management lies in the behaviour of each employee
within an enterprise ... It applies to individual men and women ... The classic
approach to industrial relations is entirely different, with its peculiarity being
collective bargaining - which, by definition, does not consider the individual but
the mass. The status of a worker is defined by a few general criteria, such as his
professional category and possibly his seniority and his age. Remuneration, for
example, is calculated on the basis of a few simple elements, which do not take
into consideration personal behaviour and individual performance. Work
provided is considered purely from the quantitative angle. The future of
collective bargaining, therefore, depends on the extent to which it can take into
account the demands for individualization which modern methods of human
resources management imply. This should not of course lead to arbitrariness
....... Legislation and regulation imposed by the State should also leave a
sufficient margin of flexibility to allow for adaptation.
David E. Guest43 concludes his analysis on the following note:
"The foregoing analysis has presented human resource management as unitarist
and individualistic in focus. It follows from this that the trade unions are
unnecessary or at best marginal. Therefore neither the model presented here, nor
the American frameworks (of several writers) see industrial relations, as
conventionally conceived, as a central human resource activity a company
practising human resource management will normally pay above the average
rate and will have excellent communication and grievance systems. Implicit in
such policies is a model of unions as providing a collective 'voice' for sources of
grievance and discontent and promoting worker interests. There is no
recognition of any broader concept of pluralism within society giving rise to
solidaristic collective orientations. Walton44 identifies a number of American
cases, notably in the automobile industry, where unions have been involved in
moves to increase commitment. At the same time he acknowledges that the role
of the union is likely to become somewhat marginal and ambiguous."
The issue considered here is whether the apparent incompatibility between IR and HRM can be
reconciled. There are several writers who have expressed strong criticisms of HRM as being
exploitative45. But a reconciliation can be explored only on the assumption that ultimately both
HRM and IR have as one of their objectives fairness and equity, that both parties are prepared
to recognize the need for enterprise and employee growth, that these are necessarily interlinked,
and that though their interests are to some extent divergent, there are increasingly areas
of common interest for mutual survival. For example, in many countries employers and
employees are perceived as two interest groups with generally opposing interests and as
belonging to different classes. In the past the relevance of employees to enterprise and national
competitiveness was less significant, but the level of employees' education and skills has never
been as crucial as it is today. Now we see - and by the turn of the century it will be all the more
apparent - a convergence of interests between employers and employees in the latter's level of
education and skills.
Before exploring the possibility of reconciling the seeming conflict between HRM and IR, it is
instructive to note some of the positions of trade unions. In his analysis of trade union views in
the USA, Canada and Britain, P.B. Beaumont46 points out that unions have sometimes
expressed views about particular elements of HRM such as quality circles, rather than of HRM
as a whole. Further, the avowed policy positions of unions at national level do not necessarily
reflect what actually happens at enterprise level. In Canada unions have expressed considerable
opposition to HRM initiatives, so much so that in the early 1980s anti-quality of worklife
resolutions were passed by some unions in two states.47 According to a conclusion based on
interviews of 17 high level union officials in Canada:
"Union leaders are convinced that management attempts towards employee
involvement, and demands for greater flexibility in work arrangements are
nothing but a 'misguided desire for a union free environment'. They are of the
view that management is more interested in speed up, more productivity than in
the worker input. Labor leaders strongly believe in the adversarial system of
labour relations citing the fundamentally different roles of union and
management at the workplace. Participation in management decision-making
initiatives, according to them, are largely cost driven, motivated by
management's desire to abdicate its responsibility by transferring to the union
the role of disciplining workers, setting one worker against the other."48
In the USA union attitudes have been mixed and more flexible, and the difference between
Canada and the USA in this respect has been explained on the basis of higher unionisation rates
in Canada49. In the USA the AFL CIO did not propound an official policy, and in some cases
such as the United Auto Workers' Union, cooperation at local union level was encouraged50. In
the case of communication workers, support for involvement was provided by the international
president51. On the other hand, the ideology motivating those who oppose initiatives such as
team work and related pay structures is that participation arrangements would enlarge the nonunion
sector.
In regard to Britain, it has been observed that the "view that HRM is in essence
the development of a set of policies, practices and arrangements designed
essentially to 'individualise' industrial relations, and thus circumvent the unions
and weaken individual membership commitment and loyalty to the union, is one
that is probably widely accepted throughout the British union movement.
However, where individual unions may well disagree is on whether they see all
individual components of HRM as equally threatening in this way, and on how
to appropriately respond to employer initiatives along these lines."52
If the apparent incompatibility between HRM and IR can be reconciled so that both could
operate as parallel systems (as collective and individual focused systems), it would require the
satisfaction of several conditions. The two can co-exist if unions and managements are
prepared and able to carve out a role for HRM, and they are able to agree on narrowing the gap
between HRM and IR. This requires changes in the thinking of unions and managements.
Some of the attitudes of unions noted earlier which are opposed to HRM initiatives, as distinct
from those which are prepared to treat particular components on their merits, could push
employers further towards noninvolvement of unions in HRM initiatives. The result of unions
keeping HRM at arms' length is reflected in the statement of a Manager at Austin Rover (UK):
"The unions were invited to the party but they didn't seem to want to come. So,
the party went ahead without them."
Unions would need to consider the possible scenario that in the years to come the likelihood is
that managements will look increasingly to HRM to enhance enterprise competitiveness. This
is particularly so as enterprises come to depend on people - on their skills and productivity - as
one critical factor in this regard. HRM is being increasingly taught as a part of management
education, and this would perhaps increase resort to HRM by future managers. Besides,
declarations of policy at national or central level may not necessarily affect what employees
and unions may in fact be prepared to do at local level. Unions could opt to be involved in
consultation mechanisms at workplace level at which new HRM initiatives are discussed. This
implies that unions need to concentrate more on enterprise level problems and issues. It also
implies massive training programmes for unions in HRM issues, if they are to be in a position
to respond to and participate in HRM initiatives. The attitude of unions on productivity issues
is likely to condition the willingness of employers to involve them in HRM initiatives. Perhaps
most of all, unions which are able to take a long-term perspective on issues are most likely to
be involved in or participate in change. For example the German unions and works councils
"have a structure of incentives, including employment security, effective representation, and
participation, continuing retraining in broad skills, which gives them a long-term perspective in
plant bargaining."54
Obtaining union cooperation would partly depend on management attitudes. If managements
believe - as some appear to do - that effective HRM can be popularised by regarding individual
enterprise action in isolation from the external labour market, then effective HRM may in the
foreseeable future remain isolated islands of excellence, rather than common practice
throughout the economy. Perhaps it is this somewhat isolationist attitude which accounts for
effective HRM in many countries still remaining the preserve of high technology enterprises,
despite its growing popularity. If management strategy is union avoidance, then IR and HRM
will be incompatible. The possibility of HRM and IR having a parallel existence is more likely
in large enterprises where direct communication with individuals is more difficult. In this
connection it may be instructive for managements to consider whether a union-free
environment is necessary for effective HRM. Contrary to popular belief, in some countries
such as the UK, HRM has been found to be seriously practised in unionised workplaces, rather
than in non-unionised ones55. Some lessons can perhaps also be drawn from the USA, which
has a low unionisation rate and where much of the practice of HRM and research has taken
place. It has been found that in the 1970s in the USA several companies
"began to adopt some of the practices of the non-union companies.
Managements, much as they have done in the UK, targeted individuals and the
trade unions were kept at arms' length. They soon found, however, that they
were not getting the maximum: the 'cold war' relations with trade unions were
undermining their efforts. In the 1980s therefore there has, at least in the USA,
been a considerable about-turn. Attempts have been made to integrate individual
and collective policies. In particular there has been a trend towards the greater
involvement of trade unions in the process of change."56
Further, Japanese practices in their large enterprises have reflected a successful blend of
collectivist IR and HRM, made possible to some extent by their enterprise union system which
has facilitated union involvement in HRM initiatives through mechanisms such as their joint
consultation system. As significant is the case of Britain, with its long tradition of IR and trade
unionism. The evidence indicates that in some instances established IR and new HRM
approaches have run parallel, indicating the practical feasibility of a dual arrangement57. It
tended to neglect union relations. The overall situation in Britain appears to be that "unions and
industrial relations have to be demonstrated as relatively secondary and incidental to meeting
market priorities, and secondary also to the newly discovered alternative ways of managing the
labour (human) resource."58
Second, there would have to be a loosening of the demarcation between HRM and IR, and
changes in IR thinking to narrow the gap between the two59. Two-way communication, training
and motivation would be examples of HRM functions. But a major problem is in the areas of
flexibility (functional, working time, types of contracts, workforce size), job design and pay
systems, where traditional IR and HRM are most likely to conflict. If, for example, reward
systems geared to performance and skills proliferate, as they are likely to, it will have an
impact on pay determination through collective bargaining. Unions may have to recognize that
collective bargaining may need to be redesigned to cover a lesser quantum of pay increases
than in the past, and that they should seek to be involved in the flexible and skill-based
elements of pay. This would involve a greater emphasis on enterprise level negotiation. IR will
be the chief means of maintaining industrial peace, and would concentrate on the means to
avoid and settle conflicts and disputes. Some countries may, for instance, opt for legal
machinery such as labour court, arbitration and conciliation processes which are external to the
enterprise and in which there is a role for all the tripartite constituents. But the relevance of
unions would also have to be in the area of conflict avoidance, and not only in the area of
conflict resolution. IR would have to adapt to changed circumstances, and accept that hitherto
sacrosanct mechanisms like collective bargaining would have to similarly adapt. "Either unions
and collective bargaining adapt to the changed environments, where markets take precedence
over hierarchies and managerial power is enhanced as regulation and protectionism recede, or
their future is increasingly questioned."60 In essence IR may have to accept that in the future its
relevance will be more at macro level e.g. in formulating overall IR policy through tripartite
processes, delimiting the boundaries of action for the two other parties and providing a
measure of social protection where needed through labour law and judicial or semi-judicial
bodies, and providing the necessary framework for the two other parties to function e.g.
freedom of association. When IR practitioners and even unions engage in initiatives to improve
workplace IR, ironically they are engaging in an essentially HRM function. If IR moves
towards a much greater concentration at enterprise level and promotes harmonious relations at
that level, it is likely to reduce the gap between IR and HRM and lessen the tension between
the two. In that eventuality, unions would have to seek an adaptive role.
Third, IR will have to open its doors to other disciplines. HRM has been responsible for
compelling IR to recognize the contributions made by other fields of study - industrial
sociology, organizational behaviour and psychology - and not only by economics and law,
which "were the two major social science disciplines in the development of IR and (which) has
led to a traditional emphasis on national level analysis of the role of union, employers and
government, as well as giving special attention to collective bargaining as a system of adjusting
influence and power."61 Since HRM deals in large measure with how people are managed
within an enterprise and involves an analysis of its effects on employees, HRM has to be
accommodated within the ambit of IR study and analysis.62
The future of IR may well depend on the capacity to develop more collaborative relations and
to move away from adversarial ones. To some extent such a development could be influenced
by HRM itself which, if effectively practised, should reduce hierarchical and authoritarian
management and result in the setting up of consultative procedures. Implicit in the workplace
IR surveys in Britain is the recognition that
"the subject matter of industrial relations has to move beyond the exclusive
preoccupation with the collective aspects of the employment relationship that
has dominated policy as well as teaching and research for the past thirty years.
The individual aspects of the employment relationship can no longer be treated
simply as part of the context. The obvious justification for giving these
individual aspects greater prominence is that the union-free sector is becoming
numerically more and more important. But this is not the only consideration. In
the union sector it is the interplay between 'collectivism' and 'individualism' that
emerges as increasingly important. Some might say that it was ever thus, and
that it was only the myopia of industrial relations specialists that stopped us
from recognizing the obvious. Be that as it may, there is no longer any
justification for not accepting that industrial relations is about the employment
relationship as a whole."63
Further, IR has often been seen (like personnel management) as a non-strategic operational
function. The notion that it represents collective relations between an employer and employees
and the union, conducted mainly through collective bargaining, reduces the collaborative
processes of communication, discussion and participation, and emphasizes bargaining. The
implication of IR is that it involves unions rather than employees. The signs are that - in
industrialized countries at least - IR is assuming more strategic proportions. This is reflected in
trends such as the move towards increased enterprise and plant level bargaining. This is a
strategic change which enables IR bargaining to focus more on workplace needs and issues,
and to also promote more direct participation of employees in bargaining. The trend towards
flexibility in place of standardisation is also a strategic move in the sense that it is designed to
increase competitiveness and the ability to respond rapidly to change.
Specific conditions in countries outside the West could affect the possibility of reconciling IR
and HRM in those countries. For instance, in countries with union multiplicity and rivalry
employees would need to organize themselves in such a way as to reduce the number of
competing unions in a workplace. The desire often expressed by employers in such countries
for one union in one workplace is an outcome of the problems flowing from multiplicity, which
include the difficulty of reaching durable and implementable agreements. In such situations
employers are unlikely to consult or involve unions in HRM strategies. In many Asian
countries unionisation is so low that there is no pressure for union involvement in HRM.
Especially in those Asian cultures which are conflict-avoidance oriented and where
relationships are determined by authority and status, IR is likely to be seen as conflictgenerating,
and HRM as more likely to achieve integration. In this connection foreign investors
have also sought union-free environments. With increasing foreign direct investment, it is not
impossible that HRM, rather than IR, will sometimes be the preferred option of some
managements.
In the final analysis, it would be unrealistic for unions or anyone else to expect managements
to abandon or reduce their resort to effective HRM when the latter is one means of achieving
management objectives geared to better enterprise management. The pre-occupation with
HRM on the part of employers is not confined to industrialized countries. The Asian emphasis
is reflected in the fact that programmes on HRM are far more likely to attract management
participation than IR, in the same way that IR programmes would attract trade unions. Though
perhaps the main challenge to unions comes from management initiatives to secure employee
commitment, the question which needs to be asked is: what is intrinsically wrong or immoral
in an employer seeking to secure such loyalty, so long as the employees themselves stand to
gain from it? Here again the Japanese example demonstrates the possibility of dual
commitment. As noted earlier, effective HRM is not widespread. If more managements
succeed in practising effective HRM, on present trends it is not impossible that IR will come to
be relegated to a secondary role. This possibility is enhanced by the fact that traditionally IR
has never been a part of strategic planning, nor has it been seen as a means of achieving
management objectives. On the other hand, HRM is increasingly seen as having a strategic role
and as a means of achieving management objectives. The convergence of other factors such as
declining union rates (if this trend continues) could also combine to push IR and unions to the
fringes.
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Leo Lingham

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