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Learning Objectives Understand the meaning and factors of industrial relations. Analyze the role of three actors of industrial relations. Study the meaning, structure and functions of trade unions. Discuss the influence, concern and impact of trade unions on business and human resource management practices of multinational companies.Chapter Ten International Industrial Relations 1

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Learning Objectives Understand the role of collective negotiations in international human resource management. Analyze various reasons for and approaches to settle industrial conflicts. Study the role of quality circles and participative management in international industrial relations.Chapter Ten International Industrial Relations 2

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Structure1. Introduction2. Three Actors of Industrial Relations.3. Trade Unions.4. Concerns of Trade Unions in Multinational Companies.5. Collective Negotiations.6. Disputes / Conflicts.7. Quality Circles and Participative Management.8. SummaryChapter Ten International Industrial Relations 3

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10.1 Introduction Human resource management practices result in creation of relations among employees , management and trade unions. Such relations are called Industrial Relations.Similarly, the human resource management policies and practices of international business with regard to different country nationals [PCN, HCN & TCN] result in relations among management of MNC and different kind of employees . Such relations are called international industrial relations.These relations play a crucial role in strategy formulation & implementation in international business either by enabling or disabling the MNcs in the process of doing business in various countries.Chapter Ten International Industrial Relations 4

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10.1 IntroductionMeaningIndustrial relations means the relationship between employees and the management in the day-today working of the industry. ILO defines “ Industrial relations deal with either the relationship between the state and employers’ and workers’ organizations or the relation between the occupational organizations themselves”.International industrial relations deals with the complex relationships among employers employing foreign national, employees of different nationalities, home and host country governments and trade unions of the organizations operating in various countries and their national & international federations.Chapter Ten International Industrial Relations 5

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10.1 IntroductionFactors of Industrial Relations[1] Institutional factors :Home and host country government policy, labour legislation, voluntary courts, collective agreement, employee courts, employers’ federations, social institutions like community, caste, creed, system of power status etc in various countries form Institutional factors.[2] Economic factors :Include economic organization, like capitalist, communist, mixed etc. , the structure of labour force, demand for and supply of labour force etc.Chapter Ten International Industrial Relations 6

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10.1 IntroductionFactors of Industrial Relations[3] Technological factors :Include mechanization, automation, rationalization, computerization, information technology etc..[4] Social and Cultural factors :Include population, religion, customs and traditions of people, ethnic groups, cultures of various groups of culture etc.[5] Political factors :Include political system in the country, political parties and their ideologies, their growth, mode of achievement pf their policies, involvement in trade unions etc.Chapter Ten International Industrial Relations 7

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10.1 IntroductionFactors of Industrial Relations[6] Governmental factors :Include host and home country governmental policies like globalization policies, industrial policy, economic polocy, labour policy, export policy, migration and immigration policies etc.Globalization policies in countries like Bulgaria brought dramatic changes in MNCs in that country. Early involvement of Trade Unions is advised when MNCs plan to take over earlier Public enterprises where there is a tradition of trade unions.Chapter Ten International Industrial Relations 8

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10.2 Three Actors of Industrial RelationsIndustrial societies necessarily create industrial relations defined as the complex of interrelations among workers, management and the government. Three major participants or factors of industrial relations, thus, are workers and their organizations, management and the government.[1] Workers and their organizations :The total worker plays an important role in industrial relations. The total worker includes working age, educational & family background, psychological factors, social background, culture, skills, attitude towards others’ work etc.Chapter Ten International Industrial Relations 9

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10.2 Three Actors of Industrial RelationsWorkers’ organizations, prominently known as trade unions, play major role in industrial relations. The main purpose of trade unions is to protect the workers’ economic interests through collective bargaining and by bringing pressure on the management through economic and political tactics. Trade union factors include leadership, finances, activities etc.[2] Employers and their organizations :Employers employ expatriates, pay salaries and various allowances, provide a variety of benefits, regulate the working relations through various policies, rules and regulations & by enforcing labour laws of the country.Chapter Ten International Industrial Relations 10

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10.2 Three Actors of Industrial RelationsThey expect workers to follow rules & regulations, contribute their resources to the maximum to achieve organizational goals and mission. The difference between demands of the workers and employers results in industrial conflict. Normally employers’ power is higher than that of their workers. But their power is undermined when compared to that of trade unions.Employers form their organizations to equate [or excel] their bargaining power with that of the trade unions. These organizations protect the interest of the employer by pressurizing the trade union and the government.Chapter Ten International Industrial Relations 11

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10.2 Three Actors of Industrial Relations[3] Government :Government plays a balancing role as a custodian of the nation. Government exerts its influence on industrial relations through its labour policy, industrial relations policy, implementing labour laws, the process of conciliation adjudication by playing the role of a mediator etc. It tries to regulate the activities and behaviour of both employees’ and employers’ organizations, individual and group organizations.Chapter Ten International Industrial Relations 12

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10.3 Trade Unions.A trade union is a continuing long term association of employees, formed and maintained for the specific purpose of advancing and protecting the interests of the members in their working relationship. Some argue that it also covers employers’ organizations and friendly societies.Workers join trade unions to attain economic security or permanent employment with higher salaries and benefits. to improve their bargaining power and balance it with that of the management.Chapter Ten International Industrial Relations 13

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10.3 Trade Unions.Workers join trade unions – contd. to ventilate workers’ grievances to management. to inform workers’ views, aims, ideas and dissatisfaction / frustration to management. to secure protection from unexpected economic needs like illness, accidents, injury etc. to satisfy their social needs. to satisfy their needs for belonging and to secure power.Chapter Ten International Industrial Relations 14

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10.3 Trade Unions.Characteristics of trade unions trade union might be an association of employees, employers or of independent workers trade unions are relatively permanent combination of workers and not temporary or casual. trade union is an association of workers who are engaged in securing economic benefits for their members. the character of trade unions has been consistently changing. the origin and growth of trade unions has been influenced by a number of ideologies.Chapter Ten International Industrial Relations 15

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10.3 Trade Unions.Functions and role of trade unions to protect & promote the interest of the workers and conditions of their employment. achieving higher wages and better working & living conditions for the members. minimizing the helplessness of the individual workers by making them stand collectively and increasing their resistance power through collective bargaining; protecting members against victimization and injustice of the employees. raising the status of the workers as partners of the industry and citizens of the society by demanding increasing share for the workers’ in management.Chapter Ten International Industrial Relations 16

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10.3 Trade Unions.Functions and role of trade unions – contd. providing worker self confidence and a feeling that he is not simply a clog in the machine. imbibing sincerity & discipline in workers. taking up welfare measures for improving morals of the workers; and to protect the right of to be consulted on all the matters affecting the workers’ interests.Responsibilities of the trade unions-Promotion of international priorities, generally influencing the socio-economic policies of the community through active participation in their formulation at various levels and instilling in their members a sense of responsibility towards industry and the international community.Chapter Ten International Industrial Relations 17

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10.3 Trade Unions.Classification of Functions of trade unions –Militant or intra mural functions: protecting the workers’ interests like hike in salaries and benefits, job security, cultural adaptability programs, etc. through collective bargaining and direct action.Fraternal or extra-mural functions: providing financial and non-financial assistance to workers during the periods of strikes and lockouts, extension of medical facilities during sickness and casualties, provision of education, recreation, recreational and housing facilities, provision of social and religious benefits etc.Chapter Ten International Industrial Relations 18

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10.3 Trade Unions.Classification of Functions of trade unions – contd.Social functions: carrying out social service activities, discharging social responsibilities through various sections of of the society like educating the customers.Political functions: affiliating a union to a political party, helping the political party in enrolling members, collecting donations, canvassing during election period, seeking help of political parties during strike or lock out.Ancillary functions: communication, welfare, education and research.Chapter Ten International Industrial Relations 19

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10.3 Trade Unions.Trade union structureCraft unions: these are horizontal unions where workers of the same craft or category form into a union. The basic logic behind the formation of such unions is that the workers belonging to the same craft do face similar problems – mostly non managerial personnel form such unions. [Drivers’ Association or Signaling Staff Union in Railways].Most stable relationship, training through apprenticeship, strong bargaining power due to their skills and high wages and better benefits are some of the advantages of craft unions.Chapter Ten International Industrial Relations 20

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10.3 Trade Unions.Trade union structureCraft unions: Possibility of employer playing one union against other and thereby breaking one of them, their irrelevance to modern days of generality of service conditions of all classes of employees and failure to cover a majority of workers of the company are disadvantages of craft unions.General Unions: If the workers of any industry, any region and any job or occupation form into one union in order to protect overall interests of the workers , such unions are called “general unions.”Chapter Ten International Industrial Relations 21

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10.3 Trade Unions.Trade union structureIndustrial unions: If the workers from the different categories form into Union, that Union is called “Industrial Union.” These are vertical unions. The logic behind formation of Industrial unions is that workers of the same industry have the common bend and they are governed by same rules and regulations and are administered by the same management. Importance of these unions is increasing these days.Joint facility for collective bargaining, demand for uniformity in the principle governing all aspects of service and working conditions; and scope for coordination of different sections, levels and natures of industry are advantagesChapter Ten International Industrial Relations 22

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10.3 Trade Unions.Trade union structureFederation and Confederation: Unions , either of the same industry or of different industries may form into association in order to improve their unity and strength. Such union of unions is called Federation. During critical situations, these federations without losing their individual identity may resort to concerted action. For this purpose Federations form into an association and such association is termed Confederation.International Federation: Federations at the national levels join international federation in order to gather support at the international level as well as to deal with HR issues of MNCs as operations of the MNCs are spread over several countries.Chapter Ten International Industrial Relations 23

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10.4 Concerns of Trade Unions in MNCs.The main concern of the trade unions towards MNCs is the possibility of MNCs shifting their manufacturing and other businesses to countries where the influence of trade unions is either zero or negligible. Hence trade unions deal with MNCs very carefully.MNCs try to locate very crucial operations that require very skilled human resource in their home country and locate other businesses in countries where required human resource is available in plenty and at low cost.Others practice home country human resource policies and procedures in all their host country subsidiary operations.Both strategies reduce or eliminate bargaining powers of the trade unions in the host countries.Chapter Ten International Industrial Relations 24

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10.4 Concerns of Trade Unions in MNCs.Influence of trade unions on HR practices of MNCsTrade unions in MNCs influence decisions with regard to employment of parent & third country nationals, salary and benefits ; and promotions.Employment:MNCs in search for the best talent prefer employment of expatriates whereas trade unions prefer appointment of host country nationals particularly for senior management jobs. Trade unions influence host country governments to enact laws for imposing the regulations and limits over the appointments of all kinds of expatriates. Thus unions in developed countries oppose MNCs relocating of jobs / business outsourcing.Chapter Ten International Industrial Relations 25

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10.4 Concerns of Trade Unions in MNCs.Influence of trade unions on HR practices of MNCsSalaries & benefits:Trade unions are concerned with two aspects in respect of salaries and benefits viz. salary discrimination between expatriates and host country nationals and enhancement of salary levels of all kinds of employees.These pressures from unions to increase salaries of host country nationals at par with those of expatriates, their demands for minimum salaries, maternity benefits, gratuity, pension, accident benefits, occupational health benefits and medical benefits result in loss of advantage of locating the operations in the host country.Chapter Ten International Industrial Relations 26

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10.4 Concerns of Trade Unions in MNCs.Influence of trade unions on Business Practices of MNCsOptimum Size:Trade unions can limit the economies of scale that MNCs can avail in the process of location, expansion diversification, mergers, joint ventures and takeovers.Location & ShiftingMNCs prefer to locate various units in different countries based on the availability of qualitative resources including human resources at the least possible cost. Trade unions of MNCs oppose such shifts to other countries as the move results in lost opportunities to workers in their country.Chapter Ten International Industrial Relations 27

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10.4 Concerns of Trade Unions in MNCs.Influence of trade unions on Business Practices of MNCsClosure of units:MNCs prefer to close the units in some countries where the human resource conditions and trade union influences are unfavourable. But the trade unions lobby the national governments in order to enact redundancy legislations & regulatory measures.In fact, some unions demand MNCs to leave some countries.Thus trade unions influence the MNCs in their HR practices as well as their business activities. MNCs in turn, in order to protect their interests formulate and implement strategies to counter influence of trade unions.Chapter Ten International Industrial Relations 28

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10.4 Concerns of Trade Unions in MNCs.MNCs strategies to Counter Trade Union Influences Offset the losses in one country with the profits earned in other country. Alternate and dual sources simultaneously to have a back up facility in case any problem crops up due to union intervention. Develop the ability to shift production locations by restricting key activities in home country and establish subsidiaries in developing countries for operations that require relatively lower level of skills.Chapter Ten International Industrial Relations 29

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10.4 Concerns of Trade Unions in MNCs.MNCs strategies to Counter Trade Union Influences Development of diversified portfolios which reduces the concentrations of trade unions control and enables the organizations to spread the risk of trade unions. Development of superior knowledge in labor laws of the host country, skills of negotiations with trade unions on salary, recruitment and other human resources.. MNCs either stop investing additional funds or divest in order to make the plant less competitive as well as non- economical , so that trade unions can’t be any more demand oriented and stop threatening the MNCsChapter Ten International Industrial Relations 30

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10.5 Collective NegotiationsCollective bargaining is a method by which trade unions protect and improve the conditions of their members’ working lives.The main characteristics of collective bargaining are –1. It is a group action as opposed to individual action and is initiated through the representatives of workers.2. It is flexible and mobile and not fixed or static.3. It is a two-party process.4. It is a continuous process.5. It is industrial democracy at work.6. It is an art , an advanced form of human relations.Chapter Ten International Industrial Relations 31

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10.5 Collective NegotiationsImportance of collective bargaining -1. Increase the economic strengths of unions and management.2. Establish uniform conditions of employment.3. Secure a prompt and fair redressal of grievances4. Avoid interruptions in work which follow strikes, go slow tactics and similar coercive activities.5. Lay down fair rates of wages and norms of working conditions.Chapter Ten International Industrial Relations 32

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10.5 Collective NegotiationsImportance of collective bargaining -6. Achieve an efficient operation of the plant.7. Promote the stability and prosperity of the industry.8. It provides a method for the regulation of the conditions of employment of those who are directly concerned about them.9. It provides a solution to the problem of sickness in the industry and ensure old age pension benefits and other fringe benefits.Chapter Ten International Industrial Relations 33

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10.5 Collective NegotiationsFunctions of collective bargaining -1) Increase the economic strength of employees and management.2) Establish uniform conditions of employment.3) Secure a prompt and fair redressal of grievances.4) Lay down fair rates of wages and other norms of working conditions.5) Achieve an efficient functioning of of the organization.6) Promote the stability and prosperity of the company.Chapter Ten International Industrial Relations 34

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10.5 Collective NegotiationsFunctions of collective bargaining -7. It provides a method of the regulation of the conditions of employment of those who are directly concerned about them.8. It provides a solution to the problem of sickness of industry and ensures old age pension benefits and other fringe benefits.9. It creates a new and varied procedures for the solution of problems as and when they arise.10. It provides a flexible means for adjustment of wages.11. It extends the democratic principle to industrial field.12. It builds up a system of industrial jurisprudence.Chapter Ten International Industrial Relations 35

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10.6 Disputes / ConflictsIndustrial dispute means any dispute or difference between employers and employers, employers and workers or between workmen and workmen, which is connected with employment or non-employment or terms of employment or with the condition of labour of any person.Causes of industrial disputes: are many. Deep seated and more basic causes of disputes can be identified through in-depth probe though surface manifestations appear to be responsible for conflicts. The relative importance of the causes is very difficult to gauge.Causes of industrial disputes can grouped as i] industrial factors; ii] management’s attitude towards workers; iii] government machinery & iv] others.Chapter Ten International Industrial Relations 36

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10.6 Disputes / ConflictsTypes of industrial conflicts: Strikes : are the result of more fundamental maladjustments, injustices & economic disturbances. Strike is a temporary cessation of work by a group of employees in order to express grievances or to enforce a demand concerning change in working conditions.Primary strikes take the form of ‘stay away strike’ , ‘stay-in or sit down strike’, ‘tools down, pen-down or mouth shut strike’, ‘token or protest strike’, ‘lightening or wild cat strike’, ‘go slow’, ‘work to rule / work to designation’, ‘picketing’, ‘boycott’ , ‘gherao’ and ‘hunger strike’.Secondary strikes are against a third party. These strikes are sympathetic strikes. There are also other strikes like general, particular, political or bandh.Chapter Ten International Industrial Relations 37

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10.6 Disputes / Conflicts The outcome of strikes is settlement of dispute in favour of employees, loss of work, loss of employment, loss of earnings by employees, inconveniences to customers, suppliers and market intermediaries.Lockouts: If the employer has any difference with the employees and if such difference is not settled through negotiations, employer may chose to close down the factory in order to force the employees to settle the differences.Lock out means the action of an employer in temporarily closing down or shutting down his undertaking or refusing to provide his employees with work with the intention of forcing them either to accept demands made by him or withdraw demands made by them or him.Chapter Ten International Industrial Relations 38

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10.6 Disputes / ConflictsPrevention of Industrial Conflicts:Methods to prevent industrial disputes cover the entire field of relations between industry and labour and include enactment and enforcement of progressive legislation, works committee & councils, wage boards, trade boards, profit sharing and co-partnership, tripartite labour machinery, education, housing, welfare work and all such measures which can bridge the gap between the employers and the employed.Conciliation by bi- or tri- partite boards, formulation & issue of standing orders, installing effective grievance redressal procedure, collective bargaining strong trade unions or allowing workers to participate in management through co-partnership and profit sharing all contribute to prevention of conflicts.Chapter Ten International Industrial Relations 39

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10.6 Disputes / ConflictsSettlement of Conflicts:Investigation: is conducted by a board or court appointed by the government. If it is conducted based on an application from either or both the parties, then it is voluntary.Mediation: In this method an outsider assists the parties to negotiate. The main aim of mediation is to bring about a settlement of disputes through voluntary agreement between the two parties.Conciliation: the main objective of conciliation or arbitration is to reunite the two conflicting parties in an industry to avoid interruption in operations.Chapter Ten International Industrial Relations 40

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10.6 Disputes / ConflictsSettlement of Conflicts:Voluntary Arbitration: If the two parties fail to arrive at a mutually agreeable settlement by themselves then they themselves or through a mediator agree to refer the dispute to arbitrator for resolution. Here the award of the arbitrator has to be accepted by the two parties for enforcement.Compulsory Arbitration / Adjudication: when the parties fail to arrive at any settlement the court or the government may refer matter to compulsory arbitration or adjudication where the award is binding on both the parties to the dispute.Chapter Ten International Industrial Relations 41

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10.7 Quality Circles and Participative ManagementQuality circle is a small group of employees in the same work area or doing similar type of work who voluntarily meet regularly for about an hour every week to identify , analyze & resolve work related problems not only to improve quality, productivity and total performance of the organization but also to enrich quality of work life of employees.Participative management is a system of communication and consultation either formal or informal by which employees of an organization are kept informed about the affairs of the undertaking or through which they express their opinions, idea, suggestions and contribute to the development of alternative solutions, evaluate them and help the management make decisions.Chapter Ten International Industrial Relations 42

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10.7 Quality Circles and Participative Management The concept of participative management , viewed from global perspective, began with the establishment of joint committees of workers in several European countries after the end of the world War I.The schemes of participation have assumed a variety of forms and structures in different countries. This was due the different political set up, governmental goals and values, economic and industrial structure and the aspects of socio-political culture of a particular country.United Kingdom:The idea of workers participation began with the industrialization and was a product of socialistic thought and humanitarian attitude of some employers.Chapter Ten International Industrial Relations 43

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10.7 Quality Circles and Participative ManagementUnited Kingdom:Joint councils were formed to discuss issues related mainly to health, welfare and safety of workers. Both the parties lost interest as the councils did not have any administrative powers. Collective bargaining in the UK is essentially a decision making process between the management and the trade unions. But the exercise is conducted with intensive power struggle, mistrust and negative pressure tactics. Hence both collective bargaining and participative management are not successful in the UK.Chapter Ten International Industrial Relations 44

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10.7 Quality Circles and Participative ManagementGermany:Works Councils were there in Germany even before the world War I, but they were suppressed by the Nazis to revive after the War. Unions play a major role in collective bargaining at Industry level. Works Councils are not supposed to enter the area of collective bargaining, but they have gradually enlarged their operations and are encroached on areas of collective bargaining in practice.Yugoslavia:The Yugoslavian system has a system of self management distinct from workers’ participation in management. The self management gives workers complete control.Chapter Ten International Industrial Relations 45

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10.7 Quality Circles and Participative ManagementYugoslavia:They can manage directly all aspects of industries through their representatives. The important bodies under self management are Workers’ Councils which is the highest authority at an enterprise level; the management Board which is executive organ of the Council; the Director who is the at the apex level and responsible to execute decisions of the Council & the Board.Then there is a People’s Committee comprising of locals and it has an advisory role in the appointment of Director and providing funds for investment and payment of wages. In practice workers are more concerned with day to day affairs & place faith in the system & enterprise.Chapter Ten International Industrial Relations 46

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10.7 Quality Circles and Participative ManagementUSA:Collective bargaining is much widely used in the USA as the chief means of for industrial democracy. US enterprises develop cooperation which takes the form of joint management committees., production committees etc. Profit sharing schemes as per Scanlon plan have become another means of fostering cooperation between workers and management.Collective bargaining is the most effective way in which workers through their trade unions influence managerial decision-making. Most of the workers and their unions are not interested in formal participation in management.Chapter Ten International Industrial Relations 47

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10.8 Summary Industrial relations deals with the relations among employees, employer, trade unions and government. International Industrial Relations deals with the complex relationships among employers employing foreign nationals , employees of different nationalities, home and host country governments and trade unions of the organizations operating in various countries and their national and international federations. Three actors of industrial relations: Workers and their organizations, employers and their organizations and governments. Trade union is an association of mostly employees.Chapter Ten International Industrial Relations 48

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10.8 Summary Functions of trade unions : Militant [protect workers’ interests], Fraternal [ assistance during strikes], Social [ social activities], Political [ political activities] and ancillary [communication, research, publications]. Trade union structure includes Craft Union, General Unions, Industrial Unions, Federations and international Federations Trade unions influence MNCs’ HRM practices, Employment, Relocation of jobs/outsourcing and salaries & benefits. Trade unions influence MNCs’ business practices, optimum size, location and shifting & closure of units.Chapter Ten International Industrial Relations 49

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10.8 Summary MNCs’ strategies to counter trade unions’ influence: Offset the losses in one country with the profits earned in other country, alternate / dual sources, develop the ability to shift production locations, development of diversified port folios and development superior knowledge. Collective bargaining is a process of discussion and negotiation between two parties viz. employer & trade union. Industrial dispute means any dispute or difference between employees and employer.Chapter Ten International Industrial Relations 50

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10.8 Summary Quality circle is a small group of employees in the same work area or doing similar type of work formed to identify , analyze and resolve work related problems not only to improve quality, productivity and total performance of the organization but also to enrich quality of work life of employees. Participative management is to encourage and allow employees to take part in decision making and decision implementation.Chapter Ten International Industrial Relations 51

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Well students this brings us to the end of our session in “International Industrial Relations”.And also completes sessions on our subject of: “International Human Resource Management.” Good Luck!Chapter Ten International Industrial Relations 52

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