Employee Relations Management at Work
Employee relations is concerned with maintaining employer–employee relationships that contribute to satisfactory productivity, motivation and morale. Essentially, employee relations is concerned with preventing and resolving problems involving individuals, which arise out of or affect work situations.
After reading this chapter, you will be able to:
Understand the employee relations imperative in the changed business environment and context
Understand the role of employee relations in the larger strategic framework
Think of practical approaches to the design and the implementation of systems and processes from an ER perspective
“You Can Never, Ever, Do Enough for Your People”1
FedEx was started in April 1973 by Fred Smith. FedEx is the world's largest express transportation company with more than 145,000 employees worldwide, delivering more than 3.2 million packages daily. They command a fleet of 634 aircrafts and more than 42,500 vehicles. They log more than 2.7 million miles each day on the ground. FedEx's revenues in 2008 were more than 37 billion USD.
FedEx has maintained its profitable commitment to excellence by applying 11 management principles. One of these eleven principles underlies FedEx's unparalleled success—you can never, ever, do enough for your people. Here is how this management principle operates at the grass roots in FedEx.
The rights and value of a single human life have become the central focus of social evolution in the industrialized world…FedEx, from its inception, has put its people first both because it is right to do so and because it is good business as well. (FedEx manager's training guide).
Fred Smith, the CEO of FedEx, put people first, knowing that service and profits would follow. The flat management structure minimizes the distance between leaders and the front-line workers, empowering employees and expanding their responsibilities. While there can be no honest unconditional commitment to a no lay-off policy, what FedEx has done is to make a commitment to reasonable employment security by cross-training employees for more flexibility and allowing for the redistribution of work during slow periods. Thoughtful and imaginative compensation schemes are at the heart of FedEx's human resources policies. FedEx may provide flexible work hours, leave of absence for family emergencies, and permanent part-time work. Benefit packages are also structured to accommodate age, health, career paths, and other personal preferences. Individual bonuses and awards are tailored towards individual preferences and not bestowed indiscriminately.
FedEx has a policy of promotion from within, a procedure for resolving employee grievances that can result in the problem ultimately being reviewed by the CEO, executive vice-president, chief personnel officer, and two senior vice-presidents.
Open communication plays such an important part in FedEx that they have set up their own internal broadcasting company, FXTV—their internal CNN which reports on everything from inclement weather, company goals, the previous night's service levels, what the competition is up to, and candid call-in programmes.
In 2008, FedEx appeared on the 97th position on Fortune's list of top 100 “Best Companies to Work For”. In fact, it has consistently found a place in this list over the years. What do we make out of FedEx way with people? FedEx must be complying with the numerous legislations concerning employees, yet in the opening passages, it appears that compliance issues must be redundant with FedEx having risen much above mere compliance and maintenance of relationships with groups of employees. There seems to be a real concern for individual employees, work groups and performance. The industrial relations approach, i.e., managing the employee collective does not seem to be critical to organizational processes at FedEx. It is something else.
The “management principles” of FedEx, as mentioned in the chapter-opening case, have shaped the employee relations approach at FedEx. It certainly has influenced the business performance of FedEx. There is a definite focus on individuals while shaping the larger “people policy”; definitely not a “one shoe fit all” mind-set that one associates with “rule making” for a collective. The primary relationship at the workplace is between the employer and an individual employee. The relationships between the employer/management and groups or unions are all secondary relationships, derived from the primary.
“Employee relations” (ER), in its original form, was a generic term used to describe the system by which workplace activities were regulated, the arrangement by which the owners, managers and staff of organizations came together to engage in productive activity. It concerned setting standards and promoting consensus for achieving objectives.
The genesis lies in the economic and social changes of the industrial revolutions and the urbanization of the nineteenth century, the inherent conflict between labour and the owners of the firms, the formation of collectives (combinations of groups of workers to look after their own interests) and the demarcation lines and restrictive practices that some occupations and trades were able to build up. The influence of these traditions remains extremely strong, particularly in long-established industries such as factory work, transport and mining.
However, recent years have seen a transformation in the way businesses are carried out and also a complete transformation of the context in which businesses are carried out. There is a felt need for a departure from the “control” and “direct” mode of managing employees, and many organizations have responded to this need worldwide. Direct engagement with the employee and seeking his wholehearted involvement with the objectives of the organization is the only means now visible to build lasting competitive advantage. This is at the core of the transition that we are witnessing and which loosely is termed as “employee relations”. The reasons for this shift have been discussed in previous chapters, but globalization, fierce competition, fast-paced technological changes, demography of the working population are only few of the forces that are shaping the shift. The main actors of the employment equation, i.e., the employer, the unions and the State are all feeling the need to readjust and reorient their perspectives. A serious attempt to change and to generate a more positive and harmonious ethos is visible, although there are variations between the three players' levels of seriousness, efforts and response. Companies and their managers have come to recognize the importance of positive employee relations and the contribution that they make to profitable and effective performance. Given the high attrition rates in knowledge and service sectors, “employees relations” is now taking a predominant and objective role. Further, when the collectivist approach of dealing with employee organizations/trade unions is resorted to, the balance of bargaining power is affected by the economic, legal and technological environments. It would still not motivate people to create high-performance teams, if their individual needs and aspirations are not addressed. At the workplace, this is translating into:
- Large-scale changes in people-related strategies and processes
- Human resources management and development becoming an area of strategic concern
- The recognition that core-competence-building and the design of the organization are key differentiators and the sources of competitive advantage
- The motivation of the employees for higher productivity, problem-solving and creativity is a necessity for which the “direct” and “control” model of management is grossly inadequate and the only way ahead is to get commitment and cooperation from the employees.
- Trade unions have to look beyond the economic demands and the organized sectors (the organized sectors seem to have outgrown the need of union intervention for economic demands anyway), and focus on larger economic and social issues.
- The government must strive to be more nimble in responding to the changes, and at the same time, protect the interests of all concerned in the productive endeavour.
8.1 Employee Relations in a Strategic Framework
The strategy of an organization refers to “a specific pattern of decisions and actions that managers take to use competences to achieve a competitive advantage and outperform competitors.”2 In this context, employee relations may be thought of as a common layer that animates the related fields of HRD, HRM and industrial relations. It is that software that tints every action in these functional areas so as to gain employee commitment for enhanced performance. It is that difficult-to-define body of actions, attitudes, systems, policies and processes, which induce competence-building. And since the building of core competence is at the core of a company's strategy, an employee relations approach assumes critical importance in the overall strategic objectives.
As we have read in the previous chapters, employee relations have evolved through different perspectives at different times, and these perspectives would impact strategic intent and fulfilment differently.
UNITARISM. This assumes that the objectives of all involved are the same or compatible, and concerned only with the well-being of the organization and its products, services, clients and customers. The most successful of unitary organizations such as McDonald's and Virgin set very well-defined and distinctive work, performance and personal standards, to which anyone working in the company must conform. This is apparent in a few Japanese companies as far as the management of human resources is concerned. With a unitary approach, clear and unambiguous strategies may be considered the salient elements.
MISSION. The mission maybe considered to be reflecting and summarizing the purpose of the organization, and its ways of working, in a clear and unambiguous manner.
TERMS AND CONDITIONS. These are based on adequate and stable wage levels, fairness and equality of work practice, managerial openness and transparency, universal access to information, regular high-quality consultation, integrity of operations and activities.
CORE VALUES (REFLECTING EXPECTED BEHAVIOUR AND ATTITUDES). The core value of employee relations is positiveness in attitude, with the view to create harmony and remove the causes of conflict, by adopting high moral and ethical standards of fairness, equality, respect, value and esteem.
CULTURE-INTEREST AND COMMITMENT. These involve strategies for generating identity, loyalty and a mutuality of interest.
WORK COMPOSITION. This would mean including the ability of everyone to progress and achieve their potential, acknowledging limitations in work division and occupational definitions, giving a universality of the principle of opportunity.
PLURALISM. This admits to a variety of objectives, not all compatible, among the staff. In view of the existing conflict, rules, procedures and systems are established to manage dissent and limit its influence as far as possible. This is the approach taken especially in public services, the local government and many industrial and commercial activities, where diverse interests have to be reconciled to in order that productive work may take place. In the pluralist perspective, a divergence of loyalties, commitments, ambitions and expectations is admitted. This means knowing and understanding what these are and why they exist. The pluralist perspective, consequently, recognizes the inherent nature of the conflict between different groups of staff, between functions, and within groups of staff. It also admits divided loyalties—an individual, for example, may have professional, occupational, work-group, trade-union or professional-body loyalties as well as those to their organization. Very often, this is reinforced where there has been a strong trade-union presence, a recent history of conflict of objectives, or where the profession exerts a strong influence on work standards and practices.
There are three perspectives that could determine the employer–employee relationship:
RADICALISM. This is the view that commercial and industrial harmony is impossible until the staff control the means of production, and benefit from the generation of wealth. Until very recently, this was the cornerstone of the philosophy of many trade unions and socialist activists in industry. The radical perspective arises from the Marxist premise that efficient and effective industrial activity could only be successful if the workers owned and controlled the means of production. This could be facilitated by the following ways:
- The promotion of employee-share-ownership schemes and profit-related pay schemes take the point of view that giving the employee this form of stake in the organization helps to gain a positive mutual identity, and that the employee's commitment is gained because they themselves share the risks and rewards.
- The promotion of the partnership concept
- Setting standards to which people are required to conform
ER strategies are also influenced by the nature of the enterprise—whether it is the public or the government that is serviced; especially, there could be variations along a continuum on the following dimensions:
CONFLICT. Conflicts in an organization can arise because of mistrust, divergence, irreconcilable aims and objectives; disparity of location; divergence and complexity of patterns of employment and occupations; and differences amongst professional, technical, skilled and unskilled staff.
CONFORMITY. The diversity of staff and technology may be (and often is) as great as in the above scenario, but where the ER strategy sets standards of behavioural and operational norms aimed at requiring the different groups to rise above their inherent differences.
CONSENSUS. The way of working is devised as a genuine partnership between the organization and its staff and their representatives. Genuine consensus or partnership is very rare. Discuss the story of the Brazilian company given in Box 8.1.
8.2 Employee Relations at the Workplace
Employee relations can be visualized as that common factor that orients the HR, IR and development functions towards building of competence within the organization. All tradeoffs within these functions and between players must be decided in long-term competitive advantage. Every function, system, policies and process would be geared towards eliciting full participation, cooperation and commitment to the achievement of the advantage. It discards the long-held belief that the management has the divine right to know “the one right answer” and that all wisdom rests with the management who needs to “direct” and “control” the employees.
8.2.1 Principles, Structures, Functions, Policies and Processes
The activities that are associated with the ER function are the following:
- The evolution of core values that determine the organization culture, attitudes and values, and also specify the standards of ethics, behaviour and attitude
- Standards of performance and the management of performance including competence development
- Organizational design
- Range of employee relations activity
- Organizational and managerial approaches to employee-management organizations and managerial approaches to the management of disputes, grievances, discipline and dismissal
- Procedures for the management of disputes, grievances and discipline
- Consultation, participation and communication structures
- Workplace climate
The Equity Concept: This concept is based on an ethical stance that all employees should be treated equally, and that the same fundamental terms and conditions of employment are to apply to all. This implies a single staff handbook applying to all, where the terms and conditions of employment are uniform. The participation in profit-sharing and gain-sharing schemes would involve everyone.
Behavioural issues reinforce this concept of equality. Everyone is addressed in the same manner regardless of occupation. The work of each employee is valued and respected.
BOX 8.1 FOR CLASS DISCUSSION
Industrial Democracy at Work
Ricardo Semler is the CEO and majority owner of Semco SA, a Brazilian company. Semler is best known for his convictions on industrial democracy and a miraculous turnaround of his company. His radical management style has generated widespread interest amongst management practitioners as well as academicians. Here is an excerpt from an article about Ricardo Semler and SEMCO:
“To see Semco's approach in action, just visit the company's pump plant on the outskirts of Sao Paulo. This operation bears about as much resemblance to a traditional factory as the rainbow hues of its walls—the choice of the employees—do to industrial gray. Forget about foremen barking out orders to passive people. On any given day, a lathe operator may himself decide to run a grinder or drive a forklift, depending on what needs to be done. João Vendramin Neto, who oversees Semco's manufacturing, explains that the workers know the organization's objectives and they use common sense to decide for themselves what they should do to hit those goals. ‘There's no covering your ass,’ says Mr Neto. ‘The intent is to get straight to specific targets.’”
Semco's 3,000 employees set their own work hours and pay levels. Subordinates hire and review their supervisors. Hammocks are scattered about the grounds for afternoon naps, and employees are encouraged to spend Monday morning at the beach if they spent Saturday afternoon at the office. There are no organization charts, no five-year plans, no corporate values statement, no dress code, and no written rules or policy statements beyond a brief Survival Manual in comic-book form that introduces new hires to Semco's unusual ways. The employees elect the corporate leadership and initiate most of Semco's moves into new businesses and out of old ones. Of the 3,000 votes at the company, Ricardo Semler has just one.
In Mr Semler's mind, such self-governance is not some soft-hearted form of altruism, but rather the best way to build an organization that is flexible and resilient enough to flourish in turbulent times. He argues that this model enabled Semco to survive not only his own near-death experience, but also the gyrations of Brazil's tortured politics and twisted economy. During his 23-year tenure, the country's leadership has swung from right-wing dictators to the current left-wing populists, and its economy has spun from rapid growth to deep recession. Brazilian banks have failed and countless companies have collapsed, but Semco lives on.
The ultimate hands-off leader, Mr Semler doesn't even keep an office at Semco. “Here's why: Our people have a lot of instruments at their disposal to change directions very quickly, to close things and open new things.” Flexibility is the key, he says. “If we said there's only one way to do things around here and tried to indoctrinate people, would we be growing this steadily? I don't think so.”
Those four words, “I don't think so,” delivered with a Brazilian Portuguese lilt, represent Mr Semler's standard answer to corporate dogma, assertions that something he wants to do cannot be done, and even overly doctrinaire interpretations of the participative management concept. Mr Semler is not a particularly self-effacing or humble advocate of human potential; his assurance in argument is legendary. In conversation, in teaching, and in his books Maverick and The Seven-Day Weekend, he puts forth participative management as not just a pragmatic path to business success, but also a healthy and enjoyable way of life.”
What kind of approach is Semco following? Do you think such approach is sustainable in the long run? Or is it just some kind of gimmick?
Source: Excerpt from Lawrence M. Fisher, “Ricardo Semler Won't Take Control”, www.strategy-business.com/press.
Differentiation between groups and categories of employees is on the basis of work function only; there are no exclusive canteens, or car-parking spaces.
The Flexibility Concept: Related to single status is the concept of the “flexible workforce”, where everyone concerned is both trained and available for any work that the organization may require of them. The employees would be oriented to this philosophy when they join the organization. This is a fundamental departure from traditional specialization, demarcation and restrictive practices. Implicit in this are obligations on the part of the employees to accept continuous training and development as part of their commitment to the organization.
The Extent of the Workers' Participation in Management: The extent of participation of the employees in the management of an enterprise is also a matter of principle that sets the tone for an approach to employee relations. Many organizations have established workers' councils in recent years. In India, the Scheme of Workers' Participation in Management even provides for having on the board of directors a representative looking after the employee interests. This will be dealt with in detail in the subsequent chapters.
STRUCTURE. We assume that considering the business and contextual imperatives, organizations will surely transit from a collectivist approach to an individual approach to the management of employees. In essence, this means that the basic approach would gradually shift towards employee relations, maybe at a pace dictated by the different pressures on different industries and establishments. However, there would remain common threads in establishing functional linkages with other departments. Organizations must appreciate the nature and strengths of the types of staff that they employ in ER/IR departments. They must recognize that there are divergences of aims, and different priorities that must be resolved if effective and profitable work is to take place. The nature of ER and related staff-management activities will vary accordingly, but at the outset, all staff must form an identity with the organization that is both positive and complementary to its purposes. Boundaries of performance and behaviour requirements must be established in order that these purposes are achieved effectively and successfully. In fact, ER staff must become role models in terms of employee behaviour as the issues they deal with impact the style of workplace regulation. Above all, ER and HRM must be seen as continuous processes and an area for constant improvement. If designed and conducted effectively by the organization, it will constitute a major return on the investment made in the workforce as a productive entity. In this context, it needs to be appreciated that even the use of the term “human resources” is slowly getting replaced by “human capital”. Human resource can become human capital only if deployed on productive work and assures an optimal rate of return on the investment made in terms of recruitment, training, etc.
The ER staff must form an identity with the organization.
Boundaries of performance and behaviour requirements must be established.
ER staff must become role models in terms of employee behaviour.
ER and HRM must be seen as continuous processes and an area for constant improvement.
The ER strategy adopted must, therefore, be supportive of, and complementary to, the wider aims and objectives of the organization. This will depend on the competence of the workforce. But ultimately, the workforce must be tuned to the needs of the organization. Effective ER strategies start from this point. They may have highly trained or professional employees; however, the overall direction of ER will seek again to match these with organizational requirements.
In organizations where the staff has a very strong group identity—because of their profession, or because of sectoral traditions, or a long history of unionism—the organization must work to ensure the harnessing and commitment of the staff members to its own purposes. If such “group think” behaviour is generated, it ultimately leads to devising IR strategies that have a collectivist approach.
Furthermore, work cohort emerging from inter-group dynamics may result in major conflicts between the “professional” commitment to clients and that to the management. Employee relations in these situations are largely ineffective. This is because of the inability of the organizations to direct their professional staff in ways universally understood as effective, and because of their lack of regard for, or ability in, ER matters. It has been compounded by the perceived conflict of objectives between service managers and service professionals.
Labour-intensive enterprises that have easy access to cheap labour have traditionally taken the view that conflict is inherent, and have sought to devise “safety-valve” ER strategies, to ensure, as far as possible, that when conflict does blow up, it can be contained without serious disruption to the work in hand. The employees in such organizations join the union, which provides welfare, leisure and recreation facilities, support for families in case of death or injury, represent their disputes, and lobby for increased investment in safety and technology. This is practised in the coal-mining sector. The workers' loyalty has been first and foremost to the union and no managing organization, either private or nationalized, has been able to provide an identity equivalent to this.
The ER strategy adopted will have to be supported by personnel/staff handbooks and rule-books, the procedures used and the ways in which these are promulgated, and any formal structures that are devised and put in place.
PROCEDURES AND POLICIES. Conformist ER requires the subordination of divergent and conflicting interests at the workplace, in the interests of pursuing common and understood goals. These are clearly specified by the organization in advance through staff circulars/brochures and other forms of internal communications. The emphatic focus is that the organization must be successful, effective and profitable, and that the purpose of ER is to contribute to this. This approach places primary responsibility on the organization and its managers. Standards are preset and prescribed, and are not the subject of negotiation. Areas of managerial prerogative, matters for consultation, and aspects open to negotiation are all clearly defined. Conformity leaves much open to consultation, but very little to genuine negotiation.
ER strategy must be supportive of, and complementary to, the wider aims and objectives of the organization.
Where staff has a very strong group identity, employee relations may evolve to harness the group commitment to the organization's purpose.
Labour-intensive organizations may adapt a “safety valve” framework for managing ER.
The procedures have to be quick and direct. The conflicts are not assumed to be dysfunctional, and managers seek to solve problems and promote harmony. The conflicts of interest between groups are kept to a minimum, and the disputes are resolved within given deadlines. Staff identity with the organization must be strong and, hence, initiatives need to be taken to promote organizational citizenship. The position of trade unions or any other staff-representative bodies is clearly defined and limited at the outset. The basis of any agreement is set by the organization. The union or representative body is invited to work within it. A union unable to do this does not get recognized.
This approach to ER is seen adopted especially by Japanese companies operating in the West. It is a conformist approach. The ER agreement is made between the company and one trade union, along the conformist lines indicated above, with the overriding concern of streamlining and ordering workplace and staff relations, to ensure that their operation is as effective and ordered as any other business activity. This implies that in case it is deemed fit to have a trade union, the organization recognizes one single union. Pre-designed and predetermined by the organization, agreements with the union are normally limited to a single site or operational division.
To be effective and successful, this strategy for the management of ER must have the following attributes:
- It must mirror the philosophy, ethos, style and values of the organization concerned; there must be a visible commitment to it.
- Managers and supervisors are trained to manage staff on a basis free from inherent conflict, and are encouraged to solve rather than institutionalize problems, when they occur.
- Wage levels tend to be competitive and revisions never backdated.
- There is one set of procedures, terms and conditions of employment only. The ER sphere is not a matter for joint negotiation or agreement.
- Disciplinary and grievance practices operate from the standpoint of resolution and prevention of the matters in hand rather than institutionalization.
- The aim is towards positive discipline. Policies and procedures are designed for the optimum speed of operation.
This style of ER, oriented to business needs, is designed as a part of the process of ensuring the success, continuity and profitability of the organization.
If the intention is to avoid unionization, then the reasons why people join unions must be removed. Trade unions grew to prominence in organizations to represent the employees' interests. So an approach to ER that precludes the need for outside representation is essential. This normally consists of adopting a welfare-driven, consultative and open mode of communication. Equity and fairness have to be the principal foundation of ER. The responsibility for the style and tone of employee relations rests entirely with the organization. The staff adopts the desired corporate attitudes, values and aspirations more through a strong internal drive towards organizational citizenship.
In the direction and management of organizational and workplace employee relations, it is necessary to translate both the background and the legal provisions into a policy statement for effective ER operations and activities. This means understanding:
- The culture and background of the employees
- The perspective of work
- The basis of the prevailing expectations and attitudes to work
- The legal requirements, both in broad terms and also their specific application to the particular organization, and the operation of its sector or sectors overall
Policies need to be written and widely circulated for the purpose of regulating workplace activities—general employment practices, standards and approaches, general standards of workplace conduct and activity, discipline, grievance, disputes, health and safety, internal opportunities and equality. They are used by managers in their pursuit of established, standardized operating procedures and the successful operation of different aspects of work. They are for guidance, and only where something requires precise operation (such as a safety procedure), or there is a legal restraint (such as with discipline), should they be adhered to strictly. Their purpose is to set standards of behaviour and practice at work. This also has implications for the more general standards of decency, ethics and staff treatment that are established at the workplace. The procedures also indicate and underpin the required attitudes, and let everyone know where they stand. More generally, they define the scope and limits of the influence of the workplace.
A blend of the following principles in varying proportions sets the tone for an ER policy of an organization:
Employee participation in management
The procedures should always be in writing, and state precisely the scope and coverage. They should be written in the language of the receiver, so that they are easily and clearly understood and followed. This enables new employees to know at the outset the defined boundaries, the dos and the don'ts, expectations and obligations on the part of both themselves and the organization. The procedures should be reviewed after due consultation and updated regularly. The final responsibility of ER policy design and implementation remains with the organization.
Policies and Procedures
Need to be written in a language easily understood
Should be widely circulated
Consulted for guidance
Set standards of workplace behaviour and practices
Define the scope and limits of the influence of the workplace
Typically, the policies and procedures must address the following standards:
- The desired attitude, approach, standpoint by which ER is to be conducted
- The ethics, standards, attitudes, values and beliefs necessary for effective conduct
- The composition, style and approach of ER and employee handbooks, manuals and procedures
- The specific attitude and standpoint from which organization discipline is to be established and implemented
- Specific organizational and operational management issues arising from the composition and mix of the workforce, the nature and location of the sector or sectors in which activities are carried out, technology used, and the ways in which work is designed
- Specific sectoral operational issues such as volatility, seasonality, poaching and attrition
- Specific sectoral psychological issues such as social respect and esteem
- Specific sectoral preconceptions, prejudices and behavioural prejudices
8.2.2 The Role of an Employee Relations Manager
Some of the important functions to be handled by an employee relations manager in a contemporary organization would include the following:
- The maintenance of employee motivation. The managers must establish formal, semi-formal and informal chains of communication with workforce representatives and with employees at large.
- Day-to-day handling of staff matters
- Negotiations, dealing with disciplinary and grievance matters, handling disputes and other problem-solving activities
- Balancing the conflicting demands of groups of employees
- Facilitating HRM by creating an atmosphere of positivism and industrial harmony. In case an atmosphere of mistrust prevails, it is the responsibility of the ER manager to move from problem to problem to ensure the attainment of some desirable solutions. The ability to make any progress and shape a more positive and effective future for the staff in such circumstances will stem from an understanding of the status quo in the first place.
- A general appreciation of the traditions, history and background of ER and creating opportunities for reviving or practising the same
- Bargaining activities
- The resolution of conflict or negotiations
- Reform if required to be carried out, either globally or at the workplace, in relation to new systems devised and implemented
8.3 Culture and Employee Relations
Both the organization structure adopted and the culture demonstrated by collective beliefs, values and ethics must match the overall purpose of the organization. This must be done in ways that ensure the best possible return on investment for an effective employee relationship, which translates into performance, responsiveness and adaptability. It is necessary to recognize that no two organizations are exactly alike.
All organizations are different. They have different methods of operation and working, different ways of doing things, different values, attitudes, beliefs and norms—different personalities, in fact. They are as different from each other as people, yet can be defined by a set of features, which translate into organization culture.
Organization Culture and Employee Relations
Age and history of the organization
The size of the organization
The nature of work
- The age and history of the organization, the degree of prominence that it has established, its traditions, its reputation and how this has arisen, its image, its standing in its markets and communities. The history, traditions and reputation require managerial understanding and activity to develop them further and, where necessary, to take remedial action.
- The size of the organization and related elements of spans of control, degrees of centralization and decentralization, departmentalization and divisionalization, the balance of primary and support functions, the nature and style of all activities. It is also necessary to consider information systems, other control mechanisms, reporting relationships and systems for the monitoring and evaluation of performance.
- The nature of work, the mix of skills, knowledge, expertise, professionalism, technical capability and other activities. People who are highly professionalized or trained bring distinctive sets of values with them, which may rub against those of the organization. Particular approaches are required, therefore, to generate organizational and operational harmony. Potential differences must be recognized at an early stage. Highly ordered and regulated tasks and series of tasks are normally mirrored in the organization of people to carry them out. At the other extreme, projects that involve pioneering and innovative work often require little formal direction, leaving much to the self-motivation and self-organization of those involved.
- The relationship between culture, structure and technology is a critical feature of the operational aspects of ER management. Small-scale activities require a lower and more flexible organization than do those with large scale, permanent or semi-permanent and mass-output methods. In large, complex organizations, economies of scale and the ER implications have to be considered, alongside questions of production and work-group organization and departmentalization. From this, there are implications concerning alienation, dysfunction, and organized labour and representation. The speed at which technology changes or becomes obsolete must also be considered. Organizations cannot seek permanence or stability in an era of rapid technological change or innovation. Even where a particular technology is deemed to have a degree of durability, its permanence may easily be called into question through the invention of a substitute, or substitute method of working, for the activity in question. The investment made in technology by organizations also has implications for the culture (and, therefore, the management of ER). Organizations that continuously upgrade their technology must also regularly improve their expertise and capability to exploit it to its full potential.
- The ability to work in harmony with the prevailing local customs and traditions. This includes religious and ethical, as well as social, pressures. It is certain to include legal constraints. There are also population size and mixes, access to services, age and composition of the local workforce. There will be standards set by other employers in the area (especially large employers) that have implications for all those working close by.
- The relationship between the organization, its markets, customers and clients, its competitors and its broader environment. This includes confidence, expansion, and contraction, economic and social factors. It includes local reputation as an employer. The states of environmental flux, diversity and complexity require organizations that can cope with, respond to and exist in harmony with the changes. It is also necessary to note the degree of stability of the environment. This includes threats and dangers of organization collapse, expansion, contraction and takeover, the loss of markets or the gaining of new markets, and also gains and losses in standing and confidence. The overall ability of the organization to survive and prosper in relation to its environment, and to fight battles with it when necessary, must be considered.
- People factors constitute a broad understanding of those who come to work for the organization. Different kinds of relationships are formed between the people and their organizations on the basis of degrees of professional and technical expertise, personal characteristics and attributes of status, ambiguity, stability and identity, and also their appropriateness to the form of organization in question. For example, a person who has a desire for a senior designation will not get this in a small, flexible organization. Nor will he or she get the same measure of order and stability from this organization as from public service, the government, or a multinational establishment. On the other hand, people with high energy, enthusiasm and ability are more likely to get frustrated in slow-moving, highly formalized organizations than in those that are flexible and dynamic.
- The extent to which the mission is clear, articulated, understood and accepted by all concerned, and the simplicity or complexity of the goals. There are also likely to be subordinate aims and objectives, which may, on the face of it, conflict with the main stated purpose. It is also necessary to recognize that organizations change their purposes and directions. This occurs for a variety of reasons—shifts in talents, qualities and technologies, new opportunities, market changes and technological advance.
- A clear positive set of values or direction given by the organization to its people, with which they can all identify. The adoption of shared values is central to the generation of high levels of commitment and motivation among the staff. Recognizing that people bring a diverse range of qualities, and their own attitudes; values and beliefs, is essential. Giving them a clear corporate purpose that is both above individual aspirations and capable of accommodating them is a key feature of effective ER management. It gives a clear indication of the prevailing ethics and morality of the organization.
- There is a close interrelationship between the management style, the work that is carried out and the way in which it is organized and directed. It is affected by the size, complexity, scale and scope of the organization. In turn, it is also affected by hierarchical considerations, nature and degrees of conformity, alienation, the nature and mix of work, the commitments, qualities, capabilities and attitudes of the staff carrying out the work, and the expertise and capacities of the managers and supervisors.
ER Policy – Organization Culture Match
ER policies would be primarily influenced by the organization culture. As an example, let us take three distinctive cultures and see how the ER policies need to be devised to overcome the barriers that such cultures create.
People/person culture: is where a group in their own overriding interests band together to produce an organization for their benefit. It is to be found in certain research groups, family firms, and companies started by groups of friends. In ER terms, the emergence of people cultures would invariably cause conflict with the broader organization at some point in time. Thus, subcultures emerge as lobbies with vested interest groups and would lead to the emergence of ER policies that cater to the needs of the most powerful subgroup. The equity principle has to be predominant here.
Task culture: is found in project teams, marketing groups and market- and customer-oriented organizations. The emphases are on getting the job completed to the customer's satisfaction, maintaining levels of customer and client satisfaction and responding to, and identifying, new market opportunities. At their best, task cultures are flexible, dynamic, adaptable and responsive. They accommodate the movements of staff necessary to ensure effective project and development teams and continued innovation, and require a degree of personal, as well as professional, commitment in the pursuit of customer satisfaction. In the management of ER, task cultures are prone to conflicts caused by confusion and task ambiguity/overlap or overload problem. Conflicts may also be caused where a group or groups perceive their task identity as distinct from others. A few members who idle away the time while the others perform tasks (called social loafing) leading to group frustration over carrying passengers is also likely. ER policies must, therefore, ensure conformity and consensus.
Role culture: is found where organizations have gained a combination of size, permanence and departmentalization, and where the ordering of activities, preservation of knowledge and experience and stability are important. The roles are defined, described and ordered. The role culture reflects the bureaucratic concept of hierarchy and permanence. Role cultures operate most effectively where the wider environment is steady and a degree of permanence is envisaged and where the demand for products and services is known to be relatively permanent and certain. Role cultures are governed by procedures and rule books. Conflicts and disputes arise, in ER terms, when there are breaches (or perceived breaches) of the rules of procedures. When conflicts do arise, each step of the way is governed by procedures that must be adhered to. At their best, these forms of ER are orderly and proceduralized; at their worst, they institutionalize and prolong conflict, which leads to frustration and alienation on the part of those involved.
8.3.1 Culture Design for Employee Relations
Whatever is done must be positive and not simply allowed to emerge by default. The values, aspirations and direction of the organization must be conveyed to all those who come to work, so that they clearly understand the attitudes, values and beliefs of the organization. Concerning some staff, this may involve a mutual rejection—organizations accommodate dissenting staff to the extent that dissents can be harmonized or made productive; to go further requires a dilution of core purpose and values. Other organizations take the view that however expert an individual may be in their chosen field, their way of working might not harmonize with the particular requirements of the situation. Flexibility, fluidity, responsiveness and initiative are all essential components of the establishment of, and ordering of, the culture and also the structure of organizations. This, then, forms the basis for:
- The Approach of ER: Its purpose and direction, the fundamental approach and attitude, suitability for organizational purpose
- ER Policy: The attitude and approach to key issues—organization discipline, the issues concerning discipline and grievances, pay and rewards, improvements in working conditions, the management style, managerial attitudes, the expectations of trade unions and/or other employee representative bodies
- The Content of ER Activities: What is included and what is not, where managerial prerogative lies, those matters open for consultation, the constitution of committees, groups and other representative bodies
- Compensation Policy: The management of pay and rewards, the attitudes to pay and rewards, differentials, equality and inequality, factors such as gain-sharing and profit-sharing options
- Problem Resolution Approaches: The organizational points of view on issues concerning pay and rewards, discipline and grievances, health and safety
- ER Systems: Formal systems, informal systems, systems for the management of specific issues—especially discipline, grievance, pay and reward, and health and safety
- Employee Communications: The process of communications, the content of written and formal communications, the content of face-to-face communications and organization responsiveness to employee issues
- Organization Development in ER: Attitudes to staff and management training, priorities for staff and management training, approach and content of the training, especially in negotiating skills, problem-solving, health, safety and emergency procedures and communications
- Decision-making Processes: Organizational and managerial standards and standpoints, content of decision-making processes, the extent to which these are autocratic, consultative, participative or democratic
- The Conduct of ER: Including consultation and participation, collective bargaining, the constitution of committees, the agenda of committees, the remit of committees, the extent of value and importance placed on key issues through these meetings— especially concerning pay and the conditions of health and safety
Flexibility, fluidity, responsiveness and initiative determine the establishment and ordering of the culture and structure of organizations. This, in turn, determines:
The approach to ER
The broad ER policy
Scope and coverage of ER activities
Communication approach and structure
Approach to problem-solving
8.3.2 Organizational Behaviour in Culture Design
Identity and commonality of purpose can only be achieved through an understanding of the people who work in the particular organization, their wants and needs, hopes, fears, desires and aspirations. The following would contribute to this understanding and, therefore, must be taken into account with the employee relations strategies:
- Leadership: Qualities and capabilities, and the roles and functions adopted in ER. The nature and style of leadership, in the particular field of ER, plays a critical role in the creation of human structures and systems, motivation and direction, the resolution of conflict, the creation of overall vision and direction and recognizing the obligations that go with this, including providing resources.
- Communication: An understanding of the processes, perception and the principles of effective communication. The style, type and language of communication, through absence or indifference, cause the generation of, and reinforcement of, attitudes and behaviour related to negativity, alienation, uncertainty and anxiety. In ER terms, oral communication is required for conducting discussions and briefings with the staff, conducting negotiations, consultations and effective interviews (especially grievance, dispute and discipline), conducting effective performance appraisal and handling staff and organizational problems.
- Decision-making: The processes by which effective decisions are achieved, their communication and promulgation, and their acceptance. The general objective of anyone in the position of having to take decisions must be to minimize risks and uncertainties, minimize negative consequences, and to maximize the chances of success and effectiveness. In order to stand the greatest chance of success, therefore, participation and consultation need to be considered.
- Power and Authority: Sources of power and authority, the use of power and authority in ER situations. In terms of the organization and management of ER, it is necessary to understand the following:
- Power and influence reside in the hands of managers because of the confidence in which they are held, as well as the expertise that they hold.
- Power and influence reside in the hands of supervisors and the employees' representative because of the extent of the support that they command.
- It is essential to understand the extent of reward power present in particular situations—especially the capability of organizations and their managers to deliver things that have been agreed upon.
- Authority and influence have strong behavioural connotations. Besides having legitimized positions and designations in the hierarchical structure, there has to be a measure of confidence and belief in the individuals, in the first place.
- Conflict in Organizations: Sources, existence, management and containment. An area where specialized employee relations departments and officials can make key contributions to organizational effectiveness is in the analysis of the potential for, and the reality of, conflict in their organizations.
Employee relations strategies must draw from findings in the following areas of organization behaviour:
Power and authority
Management of conflicts
8.4 The Future of Employee Relations
As discussed earlier, the paradigm shift from “industrial relations” to “employee relations” has created a change in the perceptions of what it is, what it constitutes and what it should achieve. In the UK, there has been a transformation in the status and influence of trade unions and, while in UK terms, this influence has declined, both the EU at large and different organizations from other parts of the world ascribe very distinctive directions and objectives to the institutions and practices of ER. In India, the trade unions are rather inactive in comparison to the aggressive stands that were taken by them earlier.
The transformation is driven by a combination of technological changes, globalization of operations and markets, advances in managerial expertise, advances in the understanding of human behaviour patterns, changes in aspiration and expectations in work situations, and changes in organization structures compounded by specific initiatives such as privatization, cost-cutting measures, and shake-ups for gaining competitive advantage.
Organizations offering security provisions through lifetime employment are continuing to do so with training, retraining and redeveloping employees. There is also the recognition of the position of staff as legitimate and key stakeholders in organizations, and new forms of profit-sharing and gain-sharing options have emerged. The EU has institutionalized this approach of “social partnership”, and embodied it in the social charter. This means that organizations are increasingly required to adopt positions of openness, honesty, employee participation and effective communication. This in itself becomes the means of focus for the development of the organization, and the generation of harmony and understanding necessary to benefit everybody who works within it.
New and current approaches are concerned to ensure that ER is both cost effective and suitable to the needs of the organization. Direct relationships are established to remove barriers of alienation and motivation. Current approaches to ER stem from an organization-wide belief that there is a contribution to be made to organizational performance, customer satisfaction, competitive edge and, above all, profitability if they are adopted.
Forces Driving Organizations Towards an ER Orientation
Globalization of operations and markets
Advances in managerial expertise
Advances in the understanding of human behaviour
Changes in aspiration and expectations in work situations
Changes in organization structures
Specific initiatives such as privatization, cost-cutting measures, and shake-ups for gaining competitive advantage
The future of ER is, therefore, dependent on the following:
- Clearly established standards that are communicated well, and training provided for conformity
- Managers are trained to value and adhere to those standards
- Problem-solving, decision-making and the resolution of disputes, grievances and disciplinary issues are conducted both from the standpoint of equity and fairness, and with a view to enhancing total departmental performance.
If ER is to be used as an effective and profitable managerial and organizational activity, the first step is to identify the organizational barriers, which could be the following:
- Tradition: This is a problem where there has been a long history of successful work in specific, well-understood and widely accepted ways.
- Success (and perceived success): If the organization is known or perceived to be successful in its current ways of doing things, then there is resistance.
- Failure: This is a barrier to change where a given state of affairs has been allowed to persist for some time. Resistance occurs when someone determines to do something about it—again, upsetting an overtly comfortable and orderly status quo.
- Technology: It is often the driving force behind jobs, tasks, occupation and activities. Their disruption causes trauma to those affected by the consequent need for job and occupation change, retraining, redeployment—and often redundancy. Technological changes, in turn, cause changes to work patterns and methods.
- Vested Interests: Needs for change are resisted by those who are, or who perceive themselves to be, at risk and for whom the current order represents a clear and guaranteed passage to increased prosperity and influence.
- Managerial: The managerial barrier is a consequence of the divorce between ownership and control.
- Bureaucracy: The bureaucracy barrier occurs where patterns of order and control have grown over long periods in the recording and supervision of activities and in the structuring of organizational functions.
8.4.2 Employee Relations and the Management of Change
When changes are required, all methods of communication at the disposal of the organization are to be invoked. This includes statutory obligations to consult with trade unions and other recognized staff-representative bodies. Good practice also requires that many different channels of communication are used, paying special attention to those who do not have formal representation. When great changes are involved, it is also usual for there to be specific individual and group problems that cannot easily be resolved in the greater scheme of things. It follows from this that it would be necessary to offer individual and group counselling and support methods and mechanisms. These are for the purpose of reassurance, the continued addressing of lingering or persisting uncertainties, and the means of tackling individual cases. They also reinforce organizational concern for, and commitment to, the specific needs of individuals and groups.
Problems are fewer, become apparent earlier, and are easier to tackle, when a general stance of openness and assertiveness is adopted. It also emphasizes the concern that organizations have for all employees. It may also be necessary to tackle managerial and supervisory groups, in order to ensure their support for what is proposed.
The most serious problems arise when, for whatever reason, the employees do not believe the message that they are receiving on account of a history of bad employee relations. It may be necessary for organizations in this situation to acknowledge their failings of the past and constitute working parties to demonstrate integrity of purpose in this set of circumstances.
Trade union, if they still exist, need to be engaged as workplace social partners. If employee interests are to be given the same status and legitimacy as shareholder interests, then employee representatives have to be the subject of a distinctive and defined organizational approach. Discuss the issues raised in Box 8.2.
A streamlined approach to the organization and management is the key to continued development of effective ER. The main issue remains the continued development of awareness and expertise in the totality of employee relations, and the contribution that it makes to the effective, profitable and enduring management of organizations. Particular attention also needs to be paid to the following:
- Technological Advance and Its Impact on Work Design and Task Design: This necessitates continued investment in training and development.
- Investment: It is important to invest in the creation of high-quality work environments for employees, regardless of the length of service, hours of work, or occupation carried out. Investment is also required in flexibility, dynamism, creativity and responsiveness, each of which has a direct measurable effect in terms of reduced sickness, absence, turnover, and conflict and grievance, as they advance employment satisfaction and security.
- Culture, Attitudes and Values: Organizations need to develop and adopt specific attitudes and values to
- Support the organization's core values
- Be capable of accommodating the differing, and often conflicting, interests of the employees
- Transcend local cultural pressures
- Create a basis of long-term, mutual commitment, serving the interests of the organization, its customers and the wider community as well as its staff.
BOX 8.2 FOR CLASS DISCUSSION
Discuss the reasons for the paradigm shift from industrial relations (IR) to employee relations (ER). In an employee relations framework, the intervention of State will reduce increasingly. Discuss with examples from contemporary developments in the Indian industry.
- Business Across Cultures: This especially applies to organizations operating in the global market. This means creating attitudes and values, and supporting these with managerial capability, so that cultural differences are transcended.
- Strategy: ER strategy is increasingly concerned with developing and reinforcing long-term clarity of employment purpose. This means:
- Reconciling the range of conflict inherent in the mix of staff capabilities and expertise present
- Investing in and committing to the long-term in terms of technology and the derived investment necessary in building competence
- Generating staff loyalty and commitment through a corporate determination to have a long-term future
Above all, this means attention to attitudes and values, training and development, and to the managerial expertise required for effective ER. It constitutes a mutual and continuous obligation.
- Flexible Patterns and Methods of Work: This is based on a combination of the demand to optimize investment in production and other technology, and the changing patterns of customer requirements. The fundamental shift in staffing patterns and methods of work that has arisen as a result implies having the corporate will, and managerial expertise and commitment, to ensure that whatever the pattern of work or hours worked, all staff members are treated with the same fundamental principles of equality and opportunity.
- Ethics: There is a realization that there is a much greater propensity for customers to choose organizations in which they have confidence and which they can trust.
All of this is only possible if there is a fundamental integrity of relationship between the organization and its staff and, arising from this, a mutual commitment to a long-term and enduring staff–management relationship based on openness, honesty and trust.
Employee relations involves the body of work concerned with maintaining employer–employee relationships that contribute to satisfactory productivity, motivation and morale. Essentially, employee relations is concerned with preventing and resolving problems involving individuals, which arise out of or affect work situations. The key to competent employee relations is in effective communications. For the mutual benefit of the employers and the employee, engaging in conversations and consultations rather than passing orders down the line will be the way companies will operate. Rigid labour legislations and controls will become less relevant and the government systems will have to look at the needs of the future. The paradigm shift from IR to ER has begun in Indian corporate organizations as they become important players in the global economy.
- The general level of understanding and appreciation required of the managers if they are to be truly effective in employee relations management is deep and complex.
- They must create a harmonious and productive working environment so that effective work can be carried out.
- Factors that dilute behavioural boundaries and constraints have to be recognized and whichever perspective is adopted, they have to be managed actively and positively.
- A distinctive ER strategy is required, and organizations need to take direct and positive responsibility for creating institutions, procedures and practices that are going to work in the particular set of circumstances, providing their managers and supervisors the necessary training and instilling the right attitude to ensure that this is successful.
- ER must be seen as a contribution to profitable and effective performance, rather than a function.
- The function of ER experts should be to ensure that organization perspectives, strategies, policies and institutions operate in harmony and that these are supported with managerial and supervisory expertise, staff awareness and understanding. In turn, the truly expert manager—in whatever field—must become an expert in daily employee management, employee relations activities, and must recognize that their contribution and expertise in this part of the job is as important as in the others.
- The essential prerequisites to the total understanding of ER from the organizational perspective are leadership, communication, decision-making, power and conflict.
- It is essential to remember that all employee relations are founded on the interactions of people, and, therefore, on their behaviour and approaches in different situations. In principle, it is essential to understand that all organization activities—of which ER is one—are dependent upon effective leadership, communication and decision-making. The absence of these causes ER problems, in exactly the same way as they cause production output and sales problems.
- Beyond this, it is essential to recognize the function of leadership, and the need for firm direction and authority in the management of ER and the potential for conflict and dysfunction that exists in all human situations.
- Only when the behavioural aspects of ER are recognized, can an effective approach to the establishment and management of organization discipline, conflict and motivation be contemplated and the establishment of effective institutions for the conduct of both strategic and operational ER be considered.
- employee relations
- What are the employee relations strategies used by employers?
- What are the functions of employee relations management? How are they different from IR?
- What are the prerequisites for ERM? Are they prevalent in the industry today?
- Discuss the cultural dimensions of ERM.
- In the context of a future in global trade and industry, what are the expected trends that are going to shape employee relations? What would be the main forces driving these changes?
QUESTIONS FOR CRITICAL THINKING
- What steps do organizations need to take to develop an ERM framework? Discuss with examples.
- ERM requires a congruence of conformity and consensus. Can this be effective using the psychological approach by ERM? Elucidate with examples.
- ERM is here to stay and unions may no longer be required to protect the interest of the workers.
- The ERM approach will work only in knowledge sectors or where the challenge is on retaining talent.
Best Textile Company
BEST Textile Company had an eventful history of dynamic industrial relations and multi-union, arm-twisting tactics that had a detrimental effect on the organization's performance. The company has now been taken over by a French company wanting to establish itself in India. The new CEO has begun the transformation process by initiating some employee-friendly programmes enumerated below:
- Maternity Leave: Extended period up to one year, in case accumulated earned leave available
- Childcare-in-house Facility
- Pick-up–Drop: Even if the staff has his/her own vehicle
- Canteen Facility: A subsidized/no profit basis
- Free-Local-Phone Facility
- ATM Inside/Near the Office
- Cheque Drop Boxes
This in effect is a paradigm shift towards employee relations. But the CEO is also holding discussions with the four unions in the three mills taken over and is initiating a process of recognizing a union through secret-ballot elections with the help of the Chief Labour Commissioner of the State.
- Do you think the new CEO's strategy would work? Give reasons.
- Can you enumerate the problems the new CEO is likely to face with this strategy?
- What suggestions can you provide to facilitate smooth industrial/employee relations at BEST Company?
Team Computers India
Attrition in Team Computers India Private Limited, an INR 300 crore IT infrastructure management company, has reached 40 per cent. The company is growing at the rate of almost 20 per cent per annum and the requirement for skilled and experienced manpower is pinching the company. The non-availability of right-profile software/hardware engineers will become the main differentiator. Team Computers is an ethical company and maintains the industry standards in respect of compensation and benefits. They adhere to all the statutory requirements as far as labour-law provisions are concerned. The human resources department spends most of its resources scouting for talent and maintaining an employee database. There is a virtual war in the marketplace for talent. Employees are bargaining for—and getting—impossible terms including a five-day week, flexi-timing, onshore deployment, full pay on bench, etc. The HR department has been dealing with a collective of staff periodically to get a feedback on their requirements, but these meetings turn out to be one-sided, economic demands from the staff. Recently, you have heard that certain national trade unions are making forays into the IT sector to lobby for the regulation of the working conditions. This would complicate matters and will have direct impact on the cost and flexibility of operations.
- What, in your opinion, are the fundamental issues faced by the management?
- What would be the correct long-term approach for handling these issues?
- Do you think the entry of trade unions in the IT industry will make it less competitive?
Dayal, Ishwar “HRD in Indian Organizations”, Vikalpa, Oct–Dec, 1989.
Joseph, Jerome “Challenges and Opportunities in Democratization of IR”, Vikalpa, Vol. 14, No. 1, Jan–March, 1989.
National Commission on Labour Report (Second), Government of India.
Raj, Aparna Industrial Relations in India: Issues, Institutions and Outlook (New Delhi: New Century Publications, 2003).
Venkatratnam, C. S. Industrial Relations (New Delhi: Oxford University Press, 2006).