You are here:

Managing a Business/Industrial relations


Sir I please help me for this questions

Q.No.1. "Collective bargaining should move from a " Win lose Strategy to a win-win strategy" .Explain how this can be feasible. Also analyse the patterns and problems of collective bargaining in India and suggest suitable measures to overcome it.
Q.No.2. "Success of any industry in India is possible only by the effective Union management relationship"- Comment on this statement with appropriate example.

Collective bargaining should move from a ‘Win- lose Strategy’ to a ‘win-win Strategy’ ” - Explain how this can be feasible. Also analyse the patterns and problems of collective bargaining in India and suggest suitable measures to overcome it.

Good relations between the employer and employees are essential for the success of industry. In order to maintain good relations, it is necessary that industrial disputes are settled quickly and amicably. One of the efficient methods of resolving industrial disputes and deciding the employment conditions is Collective Bargaining. Industrial disputes essentially refer to differences or conflicts between employers and employees.
         Collective Bargaining is a process in which the management and employee representatives meet and negotiate the terms and conditions of employment for mutual benefit. Collective bargaining involves discussion and negotiation between two groups as to the terms and conditions of employment. It is termed Collective because both the employer’s negotiators and the employees act as a group rather than individuals. It is known as Bargaining because the method of reaching an agreement involves proposals and counter-proposals, offers and counter offers. There should be no outsiders involved in the process of collective bargaining.
According to Walton and McKersie the process of Collective Bargaining consists of four types of activities:
1)      Distributive Bargaining: It involves haggling over the distribution of surplus. Various activities involved in this activity are wages, salaries, bonus and other financial issues. In this activity, both the parties face a win/lose situation.
2)      Integrative Bargaining: Also known as Interest-Based Bargaining, issues which are not damaging to either party are discussed. It is a negotiation strategy in which both the parties collaborate to find a win-win solution to their problems. This strategy focuses on developing mutually beneficial agreements based on the interests of the disputants. Issues brought up may be better job evaluation procedures, better performance appraisal methods or training programmes etc.   
3)      Attitudinal structuring: Attitudinal structuring refers to efforts by negotiators to shape their opponents' perceptions about the nature of the issues to be negotiated. By cultivating an atmosphere of friendliness, mutual respect, trust, and cooperation, negotiators can encourage their opponents to view issues largely in integrative terms and participate in joint problem solving. This activity involves shaping and reshaping some perceptions like trust/distrust, friendliness/hostility, co-operative/non-cooperative between the labour and management. When there is a backlog of bitterness between both the parties, attitudinal structuring is required to maintain smooth and harmonious industrial relations.
4)      Intra-Organisational Bargaining: It is a type of manoeuvring to achieve consensus among the workers and management. Even within the union there may be differences between different groups as may be the case with the management. Intra-organisational consensus is required for the smooth acceptance of the outcome of Collective Bargaining.
Objectives of Collective Bargaining:
1.   To maintain cordial relations between the employer and employees.
2.   To protect the interests of the workers through collective action and by preventing unilateral actions from being taken by the employer.
3.   To ensure the participation of trade unions in industry.
4.   To avoid the need for government intervention as collective bargaining is a voluntary collective process.
5.   To promote Industrial democracy.
Characteristics of Collective Bargaining:
1.   It is a group or collective action as opposed to individual action. It is initiated through the representatives of the employees.
2.   It is a flexible and dynamic process where-in no party adopts a rigid attitude.
3.   It is a continuous process, which provides a mechanism for continuous negotiations and discussions between management and the trade unions.
4.   It is a voluntary process without any third-party intervention. Both workers and management voluntarily participate in the negotiations, discuss and arrive at a solution. That is why it is known as a bipartite process where workers’ representatives and management get an opportunity for clear, face-to-face communication.
5.   It ensures industrial democracy at the workplace; it is a self-run government in action.
6.   It is a two-way process. It is a mutual give and take rather than a take home all method of arriving at a solution to a dispute.

         Process of Collective Bargaining

Preparation for Negotiation

Identifying issues for Bargaining


Negotiated Agreement

Ratification of Agreement
Implementation of Agreement

1.       Preparation for Negotiation: Preparation for negotiation in Collective Bargaining is as important as the negotiation process itself. Upto 83% of the outcomes are influenced by pre-negotiation process. Such preparation is required for both management as well as the union representatives. From the management’s point of view, pre-negotiation preparation is required as:
  Management should decide when and how to open the negotiations/dialogue.
  Management must choose the representatives to negotiate at the negotiation table.
  Draft for likely decisions should be prepared in advance so that the final agreement draft can be prepared as soon as the negotiation process is over.
From the employees’ side also, preparation is required for the following reasons:
  The union should collect the information related to the financial position of the company and their ability to pay the employees.
  The union must also be aware of the various practices followed by other companies in the same region or industry.
  The union must assess the attitudes and expectations of the employees over concerned issues so that the outcome of negotiations does not face any resistance from them.
2.       Identifying issues for Bargaining: The second step in bargaining process is the determination of issues which will be taken up for negotiations. The different types of issues are:
  Wage-related issues: Include wage or salary revision, allowance for meeting increased cost of living like Dearness Allowance (D.A), financial perks, incentives etc.
  Supplementary economic benefits: These include pension plans, gratuity plans, accident compensation, health insurance plans, paid holidays etc.
  Administrative issues: Include seniority, grievance procedures, employee health and safety measures, job security and job changes.
The wage and benefits issues are the ones which receive the greatest amount of attention on the bargaining table.
3.       Negotiation: When the first two steps are completed, both parties engage in actual negotiation process at a time and place fixed for the purpose. There a re two types of negotiations:

•   Boulwarism: In this method, the management themselves takes the initiative to find out through comprehensive research and surveys the needs of the employees. Based on the analysis of the findings, the company designs its own package based on the issues to be bargained. Thereafter, a change is incorporated only when new facts are presented by the employees or their unions.
•   Continuous Bargaining: Involves parties to explore particular bargaining problems in joint meetings over a long period of time, some throughout the life of each agreement. The basic logic behind this method is that all persistent issues can be addressed through continuous negotiation over a period of time. The success of negotiations depends on the skills and abilities of the negotiators.

4.       Initial negotiated agreement: When two parties arrive at a mutually acceptable agreement either in the initial stage or through overcoming negotiation breakdown, the agreement is recorded with a provision that the agreement will be formalized after the ratification by the respective organizations.
5.       Ratification of agreement: Ratification of negotiated agreement is required because the representatives of both the parties may not have ultimate authority to decide various issues referred to for collective bargaining. The ratification of agreement may be done by the appropriate manager authorized for the purpose in the case of management, or trade executives in the case of the employees. Ratification is also required by the Industrial Disputes Act. It is important that the agreement must be clear and precise. Any ambiguity leads to future complications or other such problems.
6.       Implementation of agreement: Signing the agreement is not the end of collective bargaining, rather it is the beginning of the process when the agreement is finalized, it becomes operational from the date indicated in the agreement. The agreement must be implemented according to the letter and spirit of the provisions made by the agreement agreed to by both parties. The HR manager plays a crucial role in the day-to-day administration implementation of the agreem

5. Define Bargaining Agent. Union or individual certified through a secret ballot process to be the exclusive representative of all the employees in a bargaining unit or group; also called bargaining representative
•   Bargaining Techniques
•   There is no formula for effective negotiations, but there are many broad issues about which the unionbargaining committee should be in agreement with respect to meetings with the management committee.Control of the agendaControl of the agenda is an exercise of power. In bargaining sessions with the employers representatives, theunion must not concede control of the agenda to the employer. Control of bargaining sessions may be eitherexplicit or implicit, and the union committee should take care not to lose such control either way. One concretemethod for maintaining control of the agenda is to make sure that the union speaks through a single, primaryspokesperson. Focusing union power through a single point transmits the appearance of control and power.Ground rules
•    One method for assuring some level of control over the agenda of bargaining is to make sure that the parties arein agreement over procedural matters that can affect the substance of bargaining. It is common for bargainingground rules to be negotiated prior to the substance of the collective bargaining agreement, either in preliminarymeetings with the employer or at the earliest bargaining sessions. Some of the matters that should be addressedas part of the procedural ground rules include: Time, place and frequency of bargaining sessions. Methods of communications between sessions, particularly when the next session is not scheduled. Release time and payment of wages for members of the union bargaining committee. Methods for maintaining an official record of the sessions, if a joint record is to be kept. An agreement that all agreements are contingent upon acceptance of the entire package. Clarification of the authority of the bargaining committee. Procedures for the exchange of proposals. Restrictions on or procedures concerning external communication about the progress of negotiations. Order of negotiations, including the negotiation of non-economic and economic provisions.
•   DocumentationNo matter what procedures exist for maintaining an official record of the negotiations with the employer, theunion must have its own mechanisms for the recording of all substantive discussions occurring in bargainingsessions. All committee members, with the possible exception of the chief spokesperson, should take notesduring bargaining sessions. One member should be given the primary responsibility for maintaining the unionrecord. One of the values of a caucus is to gain the benefit from multiple records. No matter how effective theofficial recorder is, there will be confusion in the process of negotiations. If other members have taken notes,those members will be in a position to help assure that the official record for the union is complete and accurate.The committee should periodically review the notes to assure that no significant errors or omissions have creptinto the record.ArgumentationNot everything that takes place in discussions with the employers committee is necessarily rational, but theunion should have solid arguments prepared to explain and justify its position on every issue introduced innegotiations. Techniques of argumentation and logic are useful in negotiations for three distinct purposes. Oneis the ability to explain the proposals to the management committee. The second is to justify the need for theproposed language. The third is to persuade the employers representatives of the merits of the unions position.Explanation, justification and persuasion are different concepts. The explanation of any proposal should be a rational and objective discussion of the problems giving rise to the unions proposals. Any proposal put on thetable by the union was placed there for a reason. The union committee should be prepared to define the problemthat gave rise to the proposal and the solution for that problem put forward by the union. The justification ofthat proposal goes one step further. Even if the company understands the issue and the solution addressed by theunions proposal, it is important for the union to justify the need for its proposed change in the status quo.Finally, the union must be prepared to persuade the company that the solution put forward by the union is asuperior solution to the identified problem than any other proposed change put forward.CaucusAn important tactic in the collective bargaining process is the effective use of a caucus, or opportunity for theunion to withdraw temporarily from direct negotiations with the employer. A caucus can and should be used ina number of different situations to make sure that negotiations are progressing in an appropriate manner. Someof the major reasons for the union to call a caucus during negotiations are discussed in this section.

One of the most important reasons to call a caucus is to resolve real or apparent conflict within the unionbargaining committee. If there are disagreements about issues or tactics within the committee, thosedisagreements should be resolved away from the bargaining table. Whenever it appears that committeemembers are advocating conflicting positions, the union committee should call for a caucus. Internal conflictshould be resolved away from the bargaining table, not in the presence of management.A caucus can also be used as a means of regaining control of the bargaining agenda and controlling the pace ofnegotiations. If emotions get out of hand, a break in the tension may be necessary. If sessions become toochaotic it may be wise to interrupt the flow. A caucus may also be used to increase the pace of negotiations. If asession moves off course into discussions unrelated to the substance of negotiations, a break in the process maybe a useful mechanism for refocusing attention.61. Discuss various Wages Differentials.Types of Wage DifferentialsEven a cursory glance at any aspect of the wage structure as mentioned earlier with bring to notice abewildering diversity in wage rates, not in the wages for different jobs but also in the wages for thesame job. These differentials can be grouped to facilitate comprehension under the following heads :(i) occuptional/skill wage differentials(ii) industrial wage differentials,(iii) area or geographical wage differentials,(iv) interplant/intra-plant wage differentials,(v) sex wage differentials,(vi) Race/caste/religion wage differentials,(vii) Union/non-union wage differentials,(viii) Age/seniority wage differentials.These are some the types of wage differentials and one could expand the list by adding many more.However, one should be cautious enough in any discussion on wage differentials to take note of theoverlapping nature of some of these differentials.

Give the issues in Collective Bargaining.COLLECTIVE BARGAINING ISSUESLabor unions were formed to help workers achieve common goals in the areas of wages, hours, workingconditions, and job security. These issues still are the focus of the collective bargaining process, though somenew concepts have become the subjects of negotiations. Table 1 lists the issues most often negotiated inunion contracts.THE SETTLEMENT PROCESSUnion contracts are usually bargained to remain in effect for two to three years but may cover longer or shorterperiods of time. The process of negotiating a union contract, however, may take an extended period of time.Once the management and union members of the negotiating team come to agreement on the terms of thecontract, the union members must accept or reject the agreement by a majority vote. If the agreement isaccepted, the contract is ratified and becomes a legally binding agreement remaining in effect for the specifiedperiod of time.If the union membership rejects the terms of the agreement, the negotiating teams from labor andmanagement return to the bargaining table and continue to negotiate. This cycle can be repeated severaltimes. If no agreement can be reached between the two teams, negotiations are said to have "broken down,"and several options become available.Mediation is usually the first alternative when negotiations are at a stalemate. The two parties agree voluntarilyto have an impartial third party listen to the proposals of both sides. It is the mediators job to get the two sidesto agree to a settlement. Once the mediator understands where each side stands, he or she makesrecommendations for settling their differences. The mediator merely makes suggestions, gives advice, andtries to get labor and management to compromise on a solution. Agreement is still voluntary at this point. The
mediator has no power to force either of the parties to settle the contract, though often labor and managementdo come to agreement by using mediation.If mediation fails to bring about a settlement, the next step can be arbitration, which can be either compulsoryor voluntary. Compulsory arbitration is not often used in labor-management negotiations in the United States.Occasionally, however, the federal government requires union and management to submit to compulsoryarbitration. In voluntary arbitration, both sides agree to use the arbitration process and agree that it will bebinding. As in mediation, an impartial third party serves in the arbitration process. The arbitrator acts as ajudge, listening to both sides and then making a decision on the terms of the settlement, which becomeslegally binding on labor and management. Ninety percent of all union contracts use arbitration if the union andmanagement cant come to agreement

.SOURCES OF POWERIf the collective bargaining process is not working as a way to settle the differences between labor andmanagement, both sides have weapons they can use to bolster their positions. One of the most effective uniontactics is the strike or walkout. While on strike, employees do not report to work and, of course, are not paid.Strikes usually shut down operations, thus pressuring management to give in to the unions demands. Someemployees, even though allowed to belong to unions, are not allowed to strike. Federal employees fall into thiscategory. The law also prohibits some state and municipal employees from striking.During a strike, workers often picket at the entrance to their place of employment. This involves marching,carrying signs, and talking to the media about their demands. The right to picket is protected by as long as it does not involve violence or intimidation. Problems sometimes arise during strikesand picketing when management hires replacement workers, called scabs or strikebreakers, whoCollective Bargaining IssuesWages Hours Working Conditions Job SecurityRegular Compensation Regular Work Hours Rest Periods SeniorityOvertime Compensation Overtime Work Hours Grievance Procedures EvaluationIncentives Vacations Union Membership PromotionInsurance Holidays Dues Collection LayoffsPensions Recallsneed to cross the picket line in order to do the jobs of the striking workers.The boycott is another union strategy to put pressure on management to give in to the unions demands.During a primary boycott, not only union members but also members of the general public are encouraged torefuse to conduct business with the firm in dispute with the union.Though it is rarely done, management may use the lockout as a tactic to obtain its bargaining objectives. In thissituation, management closes down the business, thus keeping union members from working. This putspressure on the union to settle the contract so employees can get back to their jobs and receive their wages.Management sometimes uses the injunction as a strategy to put pressure on the union to give in to itsdemands. An injunction is a court order prohibiting something from being done, such as picketing, or requiringsomething to be done, such as workers being ordered to return to work.GRIEVANCE PROCEDURESOnce a collective bargaining agreement is settled and a union contract is signed, it is binding on both the unionand management.

8.Success of any industry in India is possible only by the effective union management relationship" - comment on this statement with appropriate examble.

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
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
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
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
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
4. To provide social protection where needed e.g. in the areas of social security, safety and
health, child labour, etc.
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
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. #########################  

Managing a Business

All Answers

Answers by Expert:

Ask Experts


Leo Lingham


In Managing a business, I can cover all aspects of running a business--business planning, business development, business auditing, business communication, operation management, human resources management , training, etc.


18 years of working management experience covering such areas
as business planning, business development, strategic planning,
marketing, management services, personnel administration.


24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.




©2016 All rights reserved.