UNIT

VII- Industrial Rela3ons

March 2019
 Industrial Rela5ons: Part 1
•  Introduc5on of IR
•  IR overview –Concept, objec5ves & structure
•  IR Policy Pre Independence & Post
Independence
 What is IR?
•  Industrial rela5on means the rela5onship between
employers and employees in course of employment in
industrial organisa5ons.
•  θIndustrial rela5on is used to denote the collec5ve
rela5onships between management and the worker.
•  IR is used to cover such aspects of industrial life as
trade unionism, collec5ve bargaining, workers
par5cipa5on in management , discipline and industrial
disputes.
•  θDefini5on: According to J.T. Dunlop, “Industrial
rela5ons are the complex interrela5ons among
managers, workers and agencies of the government”
 Nature of IR
•  IR is concerned with the rela5onship between
management and workers and the role of
regulatory mechanism in resolving any
industrial dispute.
•  Under the IR par5cipa5ve management,
employee development, employee
remunera5on, employee safety and health

Industrial Rela5ons Policy in India
 Features of Industrial Rela5ons:
•  Industrial rela5ons are outcomes of employment
rela5onships in an industrial enterprise. These
rela5ons cannot exist without the two par5es
namely employers and employees.
•  Industrial rela5ons system creates rules and
regula5ons to maintain harmonious rela5ons.
•  The government intervenes to shape the
industrial rela5ons through laws, rules,
agreements, terms, charters etc.
 Features…contd.
•  Several par5es are involved in the Industrial rela5ons
system. The main par5es are employers and their
associa5ons, employees and their unions and the
government. These three par5es interact within
economic and social environment to shape the
Industrial rela5ons structure.
•  Industrial rela5ons are a dynamic and developing
concept, not a sta5c one. They undergo changes with
changing structure and scenario of the industry as and
when change occurs.
•  Industrial rela5ons include both individual rela5ons
and collec5ve rela5onships.
 Objec5ves of Industrial Rela5ons:
•  To maintain industrial democracy based on par5cipa5on of
labour in the management and gains of industry.
•To raise produc5vity by reducing tendency of high labour
turnover and absenteeism.
•  •To ensure workers’ par5cipa5on in management of the
company by giving them a fair say in decision-making and
framing policies.
•To establish a proper channel of communica5on.
•To increase the morale and discipline of the employees.
•  •To safeguard the interests of the labour as well as
management by securing the highest level of mutual
understanding and goodwill between all sec5ons in an
industry.
•To avoid all forms of industrial conflicts so as to ensure
industrial peace by providing be\er living and working
standards for the workers.
Importance of Industrial Rela5ons:
•  Uninterrupted Produc3on: The most important
benefit of industrial benefits is that it ensures
con5nuity of produc5on. This means con5nuous
employment for all involved right from managers to
workers.
•  Reduc3on in Industrial disputes: Good Industrial
rela5ons reduce Industrial disputes. Strikes, grievances
and lockouts are some of the reflec5ons of Industrial
unrest. Industrial peace helps in promo5ng co-
opera5on and increasing produc5on.
•  High morale: Good Industrial rela5ons improve the
morale of the employees and mo5vate the worker
workers to work more and be\er.
 Importance….contd.
•  Reduced wastage: Good Industrial rela5ons
are maintained on the basis of co-opera5on
and recogni5on of each other. It helps to
reduce wastage of material, manpower and
costs.
•  Contributes to economic growth and
development.
Causes of poor Industrial Rela5ons:
•  Economic causes: O^en poor wages and poor
working condi5ons are the main causes for
unhealthy rela5ons between management and
labour. Unauthorised deduc5ons from wages,
lack of fringe benefits, absence of promo5on
opportuni5es, faulty incen5ve schemes are other
economic causes. Other causes for Industrial
conflicts are inadequate infrastructure, worn-out
plant and machinery, poor layout, unsa5sfactory
maintenance etc.

Causes of poor Industrial Rela5ons:
•  Organiza3onal causes: Faulty
communica5ons system, unfair prac5ces, non-
recogni5on of trade unions and labour laws
are also some other causes of poor rela5ons
in industry.
•  Social causes: Uninteres5ng nature of work is
the main social cause of poor Industrial
rela5ons. Dissa5sfac5on with job and personal
life culminates into Industrial conflicts.
Causes of poor Industrial Rela5ons:
•  Psychological causes: Lack of job security, non-
recogni5on of merit and performance, poor
interpersonal rela5ons are the psychological
reasons for unsa5sfactory employer-employee
rela5ons.
•  Poli3cal causes: Mul5ple unions, inter-union
rivalry weaken the trade unions. Defec5ve trade
unions system prevailing in the country has been
one of the most responsible causes for Industrial
disputes in the country
 Sugges5ons to improve Industrial
Rela5ons:
•  Sound personnel policies: Policies and
procedures concerning the compensa5on,
transfer and promo5on, etc. of employees should
be fair and transparent. All policies and rules
rela5ng to Industrial rela5ons should be fair and
transparent to everybody in the enterprise and to
the union leaders.
•  Par3cipa3ve management: Employees should
associate workers and unions in the formula5on
and implementa5on of HR policies and prac5ces.
 Sugges5ons to improve Industrial
Rela5ons:
•  Responsible unions: A strong trade union is an
asset to the employer. Trade unions should adopt
a responsible rather than poli5cal approach to
industrial rela5ons.
•  Employee welfare: Employers should recognise
the need for the welfare of workers. They must
ensure reasonable wages, sa5sfactory working
condi5ons, and other necessary facili5es for
labour. Management should have a genuine
concern for the welfare and be\erment of the
working class.
 Sugges5ons to improve Industrial
Rela5ons:
•  Grievance procedure: A well-established and properly
administered system commi\ed to the 5mely and
sa5sfactory redressal of employee’s grievances can be
very helpful in improving Industrial rela5ons. A
sugges5on scheme will help to sa5sfy the crea5ve urge
of the workers.
•  Construc3ve aHtude: Both management and trade
unions should adopt posi5ve adtude towards each
other. Management must recognise unions as the
spokesmen of the workers’ grievances and as
custodians of their interests. The employer should
accept workers as equal partners in a joint endeavour
 Sugges5ons to improve Industrial
Rela5ons:
•  Crea5ng a proper communica5on channel to
avoid grievances and misunderstandings
among employees
•  Educa5on and training imparted to the
employees
 Stakeholders:
Employees:
•  In organized sector- 28.1 million
•  In unorganized sector- 365.1 million
(Source: Na5onal Sample Survey Organiza5on)
•  Facili5es Provided To Employees:
1.Commitment To Industry
2. Protec5ve Legisla5on
3. Status Of The Worker
4. Employment Pa\ern

 Stakeholders:
Trade Unions:
•  The union power is exerted primarily at 2 levels
–  At the industry level
–  At the plant level
•  The personal characteris5cs of workers, their culture,
educa5onal a\ainments, qualifica5ons, skills, adtude
towards work, etc. play an important role in an IR
Employers:
•  These are the persons working at management level and
taking all the decisions
•  They have the right to hire and fire any worker
Courts And Tribunals:
•  Government tribunals charged with preven5ng and se\ling
industrial disputes
 Stakeholders:
Employers Associa3ons:
•  Employer associa5ons represent employer interests before
industrial tribunals and provide a range of IR advisory
services including award interpreta5on, dispute handling
and how to counter union ac5vity
Government:
•  The government exerts an important influence on IR
through such measures as providing employment,
intervening in working rela5onships and regula5ng wages,
bonus and working condi5ons through various laws rela5ng
to labour
•  The government keeps an eye on both the trade unions
and the employer’s organiza5ons to regulate their
behaviors in the interests of the na5ons
Interna5onal Labor Organiza5on
Func5ons of ILO
Employment Rela5ons
 Role Of HRM
•  HR department contribute through be\er
recruitment and hiring, induc5on, training and
development, safety and health,
remunera5on, welfare, communica5on
channels and other prac5ces
•  Provides mo5va5on, competent and trouble-
free work force to employees
 IR Decisions
•  A proac5ve IR strategy program must cover
the following decisions:
–  Communica5on —
–  Rela5onships —
–  Competence —
–  Discipline and Conflict
 Industrial Rela5ons: Part 2
•  The Indian Industrial worker
•  Interna5onal Labor organiza5on and Global IR
impact
•  Trade Union, trade disputes & Types of trade
unions
Theories of Industrial Rela5ons
 Unitary Approach
•  UNITARY APPROACHI is grounded in mutual
coopera5on, individual treatment, team work and
shared goals.
•  Work place conflict is seen as temporary aberra5on,
resul5ng from poor management Employees who do
not mix well with organiza5on culture Unions
cooperate with the management.
•  Management’s right to manage is accepted because
there is no ‘we they” feeling Underlying assump5on is
that everyone benefits when the focus is on common
interest and promo5on of harmony Based on reac5ve
strategy.
 Pluralism(conflict Approach )
•  PLURALISM(CONFLICT APPROACH )Pluralism is belief in the
existence of more than one ruling principle, giving rise to a conflict
of interests.
•  The pluralist approach to IR accepts conflict between management
and workers as inevitable but containable through various
ins5tu5onal arrangements ( like collec5ve bargaining, concilia5on
and arbitra5on etc) and is in fact considered essen5al for
innova5on and growth.
•  It perceives organiza5ons as coali5ons of compe5ng interests ,
where the management’s role is to mediate among the different
interest groups.
•  It perceives trade unions as legi5mate representa5ve of employee
interests It also perceives stability in IR as the product of
concessions and compromises between management and unions
 Marxist Approach
•  MARXIST APPROACH Marxists like pluralists also regard conflict as
inevitable but see it as a product of capitalis5c society where as
pluralist believe that the conflict is inevitable in all organiza5ons
•  For Marxists IR has wider meaning. For them conflict arises not
because of ri^ between management and workers but because of
the division in the society between those who own resources and
those who have only labor to offer.
•  Marxist approach thus focuses on the type of society in which an
organiza5on func5ons.
•  Industrial conflict is thus equated with poli5cal and social unrest
Trade Unions are seen both as labor reac5on to exploita5on by
capitalists, as- well-as a weapon to bring about a revolu5onary
social change.
 The System Approach
•  The system approach was developed by J. P. Dunlop of Harvard
University in 1958.
•  According to this approach, individuals are part of an ongoing but
independent social system.
•  The behaviour, ac5ons and role of the individuals are shaped by the
cultures of the society.
•  The three elements of the system approach are input, process and
output.
•  Society provides the cue (signal) to the individuals about how one
should act in a situa5on.
•  The ins5tu5ons, the value system and other characteris5cs of the
society influence the process and determine the outcome or
response of the individuals. The basis of this theory is that group
cohesiveness is provided by the common ideology shaped by the
societal factors.
 Union Structures
•  Union structures differ considerably among countries,
e.g.
–  Industrial unions – Represent all grades of employees in an
industry;
–  Cra^ unions – Based on skilled occupa5onal groupings across
industries;
–  Conglomerate unions – Represent members in more than one
industry;
–  General unions – open to almost all employees in a given
country.
•  IR policies must be flexible enough in order to adapt to
local requirements.

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 Trade Union Structures in Leading
Western Industrial Socie5es
Australia General, craft, industrial, white-collar
Belgium Industrial, professional, religious, public sector
Canada Industrial, craft, conglomerate
Denmark General, craft, white-collar
Finland General, white-collar, professional and technical enterprise
Japan Enterprise
Norway Industrial, craft
Sweden Industrial, craft, white-collar and professional
Switzerland Industrial, craft, religious, white-collar
The Netherlands Religious, conglomerate, white-collar
UK General, craft, industrial, white-collar, public sector
US Industrial, craft, conglomerate, white-collar
West Germany Industrial, white-collar

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 Key Issues in Interna5onal Industrial Rela5ons

•  Na5onal differences in economic, poli5cal and legal systems

produce markedly different IR systems across countries
•  Mul5na5onals generally delegate the management of IR to
their foreign subsidiaries. However, a policy of
decentraliza5on should not keep corporate headquarters
from exercising some coordina5on over IR strategy.
•  Generally, corporate headquarters will become involved in
or oversee labor agreements made by foreign subsidiaries
because these agreements may affect the interna5onal
plans of the firm and/or create precedents for nego5a5ons
in other countries.

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 Factors Influencing Interna5onal Industrial
Rela5ons

•  Degree of inter-subsidiary produc5on integra5on

•  Na5onality of ownership of the subsidiary
•  IHR management approach
•  MNE prior experience in industrial rela5ons
•  Subsidiary characteris5cs
•  Characteris5cs of the home product market
•  Management adtudes towards unions

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 Degree of Inter-subsidiary Produc5on
Integra5on
•  High degree of integra5on was found to be the most important
factor leading to the centraliza5on of the IR func5on within the
firms studied.
•  Industrial rela5ons throughout a system become of direct
importance to corporate headquarters when transna5onal
sourcing pa\erns have been developed, that is, when a
subsidiary in one country relies on another foreign subsidiary as
a source of components or as a user of its output.
•  In this context, a coordinated industrial rela5ons policy is one of
the key factors in a successful global produc5on strategy.

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 Na5onality of Ownership of the Subsidiary

•  US firms tend to exercise greater centralized control over labor rela5ons

than do Bri5sh or other European firms.
•  US firms tend to place greater emphasis on formal management controls
and a close repor5ng system (par5cularly within the area of financial control)
to ensure that planning targets are met.
•  Foreign-owned mul3na3onals in Britain prefer single-employer bargaining
(rather than involving an employer associa5on), and are more likely than
Bri5sh firms to assert managerial preroga5ve on ma\ers of labor u5liza5on.
•  US-owned subsidiaries are much more centralized in labor rela5ons decision
making than the Bri3sh-owned, a\ributed to:
–  More integrated nature of US firms
–  Greater divergence between Bri5sh and US labor rela5ons systems than
between Bri5sh and other European systems, and
–  More ethnocentric managerial style of US firms

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 Prior Experience in Industrial Rela5ons

•  European firms tend to deal with industrial unions

at industry level (frequently via employer
associa5ons) rather than at the firm level.
•  The opposite is more typical for U.S. firms
•  In the U.S., employer associa5ons have not played a
key role in the industrial rela5ons system, and firm-
based industrial rela5ons policies are the norm.

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 Management Adtudes towards Unions

•  Knowledge of management adtudes or ideology

concerning unions provides a more complete explana5on
of mul5na5onal industrial rela5ons behavior than relying
solely on a ra5onal economic model.
–  Compe55ve/confronta5onal versus coopera5ve
–  Codetermina5on
–  Works council
•  Union density in western industrial socie5es
–  Denmark has the highest level of union membership
–  U.S. has the second lowest
–  France has the lowest in the western world.

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Industrial Disputes and Strike Proneness

•  Hamill examined strike-proneness of mul5na5onal subsidiaries and

indigenous firms in Britain across three industries.
•  Strike proneness was measured via three variables:
–  Strike frequency
–  Strike size
–  Strike dura5on
•  There was no difference across the two groups of firms with regard
to strike frequency.
•  But mul5na5onal subsidiaries experienced larger and longer strikes
than local firms.
–  Foreign-owned firms may be under less financial pressure to se\le a
strike quickly than local firms – possibly because they can switch
produc5on out of the country.

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 Trade Unions and Interna5onal Industrial
Rela5ons

•  Trade unions may limit the strategic

choices of mul5na5onals in three ways:
–  By influencing wage levels to the extent that cost
structures may become uncompe55ve;
–  By constraining the ability of mul5na5onals to
vary employment levels at will; and
–  By hindering or preven5ng global integra5on of
the opera5ons of mul5na5onals.

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 Influencing Wage Levels
•  Although the importance of labor costs
rela5ve to other costs is decreasing, labor
costs s5ll play an important part in
determining cost compe55veness in most
industries.
•  Mul5na5onals that fail to manage their
wage levels successfully will suffer labor
cost disadvantages that may narrow their
strategic op5ons.
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 Trade Unions’ Response to Mul5na5onals

•  Seeing the growth of mul5na5onals as a threat to the

bargaining power of labor because of the considerable
power and influence of large mul5na5onal firms.
•  Mul5na5onals are not uniformly an5-union, but their
poten5al lobbying power and flexibility across na5onal
borders creates difficul5es for employees and trade
unions to develop countervailing power.
•  There are several ways in which mul5na5onals have an
impact upon trade union and employee interests.

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 Seven Characteris5cs as the Source of Trade
Union Concern about Mul5na5onals
•  Formidable financial resources
•  Alterna5ve sources of supply
•  The ability to move produc5on facili5es to other countries
•  A remote locus of authority
•  Produc5on facili5es in many industries
•  Superior knowledge and exper5se in industrial rela5ons
•  The capacity to stage an ‘investment strike,’ whereby the
mul5na5onal refuses to invest any addi5onal funds in a
plant, thus ensuring that the plant will become obsolete and
economically non-compe55ve.

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 The Response of Trade Unions to
Mul5na5onals
•  The response of labor unions to mul5na5onals has been
threefold:
–  Form interna5onal trade secretariats (ITSs)
–  Lobby for restric5ve na5onal legisla5on, and
–  Try to achieve regula5on of mul5na5onals by interna5onal
organiza5ons.
•  Interna5onal trade secretariats (ITSs).
–  There are 15 ITSs, which func5on as loose confedera5ons to
provide worldwide links for the na5onal unions in a par5cular
trade or industry (e.g. metals, transport and chemicals).
–  The secretariats have mainly operated to facilitate the exchange
of informa5on.

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 Industrial Rela5ons: Part 3
•  Problems of Indian T.Us
•  TU Federa5ons in India
•  Philosophies & objec5ves of major Indian TU
federa5ons and Philosophies & objec5ves of
major Indian TU federa5ons
Case Study

Let’s review