CHAPTER 20

Industrial Relations

CHAPTER OBJECTIVES

After reading this chapter, you should be able to:

1. Understand the characteristics and objectives of industrial relations
2. List the major players in industrial relations
3. Understand the various approaches to industrial relations
4. Discuss the latest trends in industrial relations
5. Enumerate the essentials of effective industrial relations

Royal Dutch Shell is a leading global integrated oil company with nearly $1 billion investment in India’s energy sector. In fact, it is the only global major to have a fuel retail licence in India. Since it operates in more than 145 countries, its HR policies and practices are globally standardized.

The focus of the industrial relations at Shell is on the morale and motivation of the employees. It aims at knowing the feelings of the employees about their work in the company and building a strong relationship with the employee representatives, namely, the unions. In fact, Shell devotes considerable time and energy to communicate with and consult the employees and their representatives with the intention of making them realize that they are involved in the decision-making process. The highlight of its industrial relations exercise is the global Shell People Survey conducted once in two years to discover the real views of its employees across the world.

The successful industrial relations promotion activities of Shell involve effective communication and consultation with the staff globally before undertaking large-scale changes. The consultation with the employees may involve (i) consulting and negotiating with the trade unions and staff councils, (ii) identifying and recognizing the best practices, and (iii) conducting, analysing and acting on attitudinal surveys. The industrial relations measures of this energy giant prove its importance to the growth and success of an organization unambiguously and we discuss its details in this chapter.

Introduction

The relationship between the employer and the employee is usually referred to as industrial relations. The labour–management relationship is a highly sensitive and complex aspect influenced by a variety of factors. The nature of the industrial relationship in an organization is determined by factors such as the organizational culture, the attitude of the management, employees and unions, the condition of employment, the existence of a grievance-handling system and dispute settlement procedures, and the efficacy of rules and regulations. As a separate field of study, it is basically concerned with the systematic study of the various aspects of the labour–management relationship.¹ An industrial relationship arises out of the continuous interaction between the employers and the unions, which represent the employees. Thus, the chief actors in industrial relations are the employers and the unions, and their main relationship is through collective bargaining. Compensation-related issues, workload problems, retrenchment, layoffs and similar issues can determine the degree of cordiality in the industrial relationship collectively and individually.

The efficacy of industrial relations can be measured through the man-days lost due to strikes, lock-outs and other forms of disturbances in the organization. Generally, the government plays a proactive role in establishing harmonious industrial relations since labour–management problems usually have a social dimension. It acts as a partner and a facilitator in the industrial relations exercises of the organization. It contributes effectively to the establishment of harmony in the industrial relations by enacting laws, formulating polices and participating in the collective bargaining process and tripartite talks. It also acts as a conciliator or the third party in dispute settlement forums. The terms industrial relations, employee relations and labour–management relations are used interchangeably by the organizations while dealing with the employer–employee relationships in the organizations.

The protection of the mutual interests of the employees and the employers is the essence of the definitions of industrial relations. We shall now see a few of these definitions in Box 20.1.

We may define industrial relations as a process through which an organization controls the employer–employee relations in the organization and this process may involve continuous communication and consultation between them.

Characteristics of Industrial Relations

Based on these definitions, industrial relations may be said to have the following characteristics:

• The important actors in industrial relations are the employers, the employees and their unions, and the government.
• It involves the deliberate selection of strategies and the framing of rules and procedures by the management that would improve the industrial relations of an organization.
• Industrial relations emphasize the development and execution of activities that accomplish the joint objectives of both the employers and the unions, resulting in improved industrial relations.
• The protection of the interests and the fulfilment of the needs of both the employers and the employees are the fundamental characteristics of industrial relations.
• Industrial relations provides a coordinated and strategic approach to managing the employees of an organization.
• The government plays a proactive role in industrial relations in the form of a facilitator, a policy maker and a mediator in tripartite talks.

Objectives of Industrial Relations

Developing mutual respect and tolerance is the primary objective of both the employers and the unions in the industrial relations exercise. However, this calls for systematic and sustained efforts on the part of the organization. We shall now see the other objectives of industrial relations.

Building Cordial Relationships with the Employees

Organizations aim to achieve warmth and friendliness in their relationship with the employees and their unions through industrial relations.

Maintain Connectedness

Organizations look to remain connected with the employees through the industrial relations exercise. In fact, industrial relations tries to expand on the first connectedness brought into existence by the employer–employee contract.⁶

Safeguarding Mutual Interests

Through industrial relations, organizations strive to protect the interests and the well-being of their major stakeholders, namely, the employers and the employees. This is done by ensuring a free and frank exchange of feelings, opinions and grievances at the highest level on a regular basis.

Utilizing Collective Wisdom

Through industrial relations exercises, organizations involve unions in the decision-making process, which, in turn, helps the management in utilizing their knowledge and expertise for the betterment of the organization.

Preventing Industrial Conflicts

“Conflict is the motive force of the industrial relations system.”⁷ This is because an important purpose of industrial relations is to contain industrial conflicts, which normally result in the loss of man-days. Through conflict management strategies involving employers, employees, trade unions and even government, the industrial relations provide for dispute prevention and settlement.

Fostering Industrial Democracy

Through the industrial relations system, organizations attempt to promote industrial democracy by involving the employees and their unions in the critical areas of decision-making like conflict resolution, compensation fixation and policy formulation.

Avoiding Exploitation

Employees as individuals cannot bargain effectively for their economic and social rights. In the absence of industrial relations and collective bargaining, they may be deprived of their rightful claims to the organizational resources in the form of compensation. In contrast, industrial relations facilitates them in using their collective strength in getting fair compensation and other benefits.

Providing a Dynamic Role for the Government

Industrial relations provides a formal means for the government to take an active part in the deliberations involving the employers and the unions as a third party and bring about a rapprochement when either of them adopts a tough posture and the talks end in a stalemate.

Major Players in Industrial Relations

Industrial relations cannot be performed in isolation. Being a social activity, it requires interaction among all the stakeholders of the industrial relations system namely, employers, trade unions and government. Since industrial relations warrant a continuous interaction among the different parties, the role of each party is crucial to the success of the industrial relations exercise. Industrial relations is not confined to the relationship between the employers and the trade unions; rather, it moves beyond that to cover all forms of inter-group and intra-group interactions taking place in an organization. In fact, each interaction, whether it is formal or informal, contributes directly or indirectly to the existing industrial relations. We shall now see the role and responsibilities of the major parities in the development of industrial relations.

Employers and their Associations

Understandably, the primary responsibility for ensuring cordiality in the industrial relations rests with the employers. This is because the employees’ attitude towards management is greatly influenced by the nature of industrial relations prevailing within the organization. There is no denying the fact that the management has inalienable rights in the organization with regard to the recruitment and separation of employees. It also has the right to decide on policy matters like expansion, restructuring and closure, notwithstanding their impact on the workers’ interests. Employers have all the right to expect the employees and their unions to respect their rights. However, the management also has a responsibility to respect the rights of the employees and to safeguard their interests in the organization. With regard to the employees, the management has a responsibility to ensure them minimum wages; to guarantee their health and safety within the organization; to assure the availability of equal opportunities to all employees of equal skills and calibre; to be fair in settling their disputes and redressing their grievances; to guarantee reasonable work schedules and hours of work; to improve their general well-being in all possible manners;

In industry-level forums, the employers may be represented by their associations in talks with the trade unions. They may act as pressure groups on the government to protect the interests of the employers and represent the employers strongly in all the national- and industry-level negotiations with the workers’ unions and managers’ associations. Some of the major employers’ associations in India are the Confederation of Indian Industry (CII); the National Association of Software and Services Companies (NASSCOM), Associated Chambers of Commerce and Industry of India (ASSOCHAM); All India Manufacturing Organization (AIMO); Federation of Indian Chambers of Commerce and Industry (FICCI); the World Association of Small and Medium Enterprises (WASME); and Federation of Association of Small Industries of India (FASSI).

Employees and their Unions

Employees and their unions play a crucial role in helping the business achieve its objectives and also in fostering positive industrial relations within the organization. In this regard, the employees of an organization must know the job-related expectations of their employers. Similarly, they should also convey their own expectations to their employers unambiguously. The employees may choose to express their demands, feelings and opinions to the employers either directly or through their unions. We shall now discuss separately the role of the individual employees and that of their trade unions in promoting industrial relations.

Employees The success of industrial relations depends to a great extent on the attitude of the employees towards the organization and its policies. An understanding of the numerous problems of the employers from their perspective by the employees helps in getting better cooperation from the latter. For this, it is essential for the employers to ensure that the industrial relations be decentralized and carried out at different levels of the organization, including at shop-floor levels. Besides their unions, the employees must be allowed to take part in the relations-building exercise at their workplaces. The double form of workers’ representation, namely, trade union representation and direct employee participation, in the different forums at different levels can surely help the organizations in exchanging the information mutually and solving the problems collectively.

It is essential for the employees to appreciate the problems of their employers and be flexible and cooperative in solving the organizational problems. They must realize that their well-being hinges crucially on the well-being of their organization. They should believe in an accommodative approach and be prepared to look at the implications of their demand from the organizational perspective. For instance, while demanding better economic conditions, they must also consider the financial capability of their organization and the present conditions of the market. They must always be committed and loyal, and should be ready to subordinate their individual interests to the organizational interest.

Trade Unions Undoubtedly, trade unions play a pivotal role in the industrial relations–building activities of the organization. The labour unions, as the representatives of the employees, wield enormous clout in the industrial relations processes like collective bargaining. The unions in India enjoy a lot of political power and often act as a wing of the political parties. They should not care solely about the rights and interests of the employees but also have concern for the organizational interest. They must hear out the views of the employers on issues affecting the organization and should also share their concern. They should never use unfair means to get the employees’ demands fulfilled by the management. Besides, they should not make unreasonable demands on the employers. They must not intimidate the employers with threats of strike, boycott and picketing.

As far as the employee interests are concerned, the unions must work smartly in the collective bargaining process to influence the employers positively to provide better welfare facilities for the employees and protect their interests from all forms of exploitation. They must also get involved in the organizational decision-making process by participating effectively in various forums such as board of directors, joint management councils, plant councils and shop floor councils. Similarly, they must also represent the employees effectively in collective bargaining conducted at the national, regional, sectoral, or corporate levels. They should organize the issues affecting the employees like compensation and working conditions properly and present them methodically to clinch the issues in a mutually beneficial manner. Despite the importance of the unions as a protector of employee rights and privileges, there is in general a declining trend observed in their membership due to the changing characteristics of the employees, employers and environment.⁸

Government

The government has been playing multiple roles in safeguarding the interests of the employees and in ensuring harmony in industrial relations. It acts as the facilitator and regulator of the industrial relations process. It also acts as the policy maker by enacting necessary laws and amendments in the existing laws to foster industrial relations in the organization. After Independence, the government introduced the Industrial Disputes Act, 1947, as a legal measure to regulate the industrial relations in the organizations. The purpose of this act is to (i) establish a permanent system for the prevention or settlement of disputes through works committees, conciliation officers, industrial tribunals, and labour court, and (ii) make an award of a tribunal binding on the parties and legally enforceable. Besides, the Trade Union Act, 1926, was also amended adequately and the unfair and unconstitutional activities of both the employers and the unions were defined clearly.

Approaches to the Study of Industrial Relations

Since the employers and the employees have conflicting interests over the organizational resources, industrial relations remains a complex and sensitive issue. On the one hand, the employers in business aim at making more profits and faster growth by reducing cost. On the other hand, the employees seek to enhance their income and social status by demanding more compensation from the employers, and this will obviously push up the cost of production. The interests of the employers and those of the employees often remain irreconcilable and their stand remains mutually antagonistic.

Industrial relations problems may arise from psychological, social, economic, or political factors. They may also arise from a combination of two or more of these factors. Therefore, the study of industrial relations requires an in-depth and multi-faceted approach. The study of industrial relations has drawn heavily from the disciplines of economics, sociology, psychology, law, politics, accounting, and management studies. Obviously, the issues confronting industrial relations need to be studied on a multi-disciplinary basis to understand the sources of the problems and to tackle them effectively. Obviously, several approaches (see Figure 20.1) have been developed for the study of industrial relations. These approaches are: (i) the unitary approach, (ii) the pluralist approach, (iii) the system approach, (iv) the social action approach, (v) the Marxist approach, (vi) the Gandhian approach, (vii) the human relations approach, (viii) the Giri approach, (ix) the industrial sociology approach, and (x) the Oxford school approach. We shall now discuss these approaches.

The Unitary Approach

The unitary approach is characterized by a form of administration in which power is vested with a single authority. In the case of the unitary approach to industrial relations, the authority rests solely with the management with no right to anyone to challenge its decisions. According to the proponents of this approach, its basic assumption is that the common values and objectives unite and bind both the management and the workers.⁹ The use of power in this approach is only for the common good and interest. The management, this approach believes, must deal strongly with the perceived challenges born out of irrational beliefs, the short-term preoccupations and the narrow perspectives that develop from the ignorance of the challengers to its authority and to the overall system. In essence, this approach is not appreciative of the role of trade unions in the organization and, certainly, they are not welcome. However, there are two perspectives within the unitary approach.¹⁰ The first perspective holds the view that the industrial conflicts are abnormal and must be suppressed by all possible means. The second perspective, which is modern and sophisticated, views the industrial conflicts as unavoidable but believes that they ought to be controlled through diligent planning and management.

The Pluralist Approach

Unlike the unitary approach, the pluralist approach believes in basic ground rules, negotiated settlements and mutual compromises for solving the industrial conflicts. The basic assumption of this approach is that the disagreements between the parties to the industrial relations on important issues are not unbridgeable by compromises and the collaborations can continue at all stages.¹¹ In the pluralist approach, the power is not vested with any one group; rather, a balance of power is maintained between the parties to the industrial relations. Besides, the employers and the employees have a shared morality in upholding the cordial industrial relations through accommodative discussions and amicable decisions. This approach accepts that the company is made up of different interest groups and recognizes the trade unions as the rightful negotiators for the employees. Thus, the pluralist approach emphasizes industrial democracy and collective bargaining. Based on the balance of power and the parties involved, the pluralist approach can be further classified into liberal collectivist, corporatist, liberal individualist and Marxist variations.¹²

The System Approach

The system approach was developed by J. P. Dunlop of Harvard University in 1958. According to this approach, individuals are part of an ongoing but independent social system. The behaviour, actions and role of the individuals are shaped by the cultures of the society. The three elements of the system approach are input, process and output. Society provides the cue (signal) to the individuals about how one should act in a situation. The institutions, the value system and other characteristics of the society influence the process and determine the outcome or response of the individuals. The basis of this theory is that group cohesiveness is provided by the common ideology shaped by the societal factors.

According to Dunlop, the industrial relations system comprises certain actors, certain contexts, and an ideology, which binds them together and a body of rules created to govern the actors at the workplace and work community.¹³ The actors in the system are the managers, the workers and their representatives, and the government agencies. The rules in the system are classified into two categories: substantive rules and procedural rules. The substantive rules determine the conditions under which people are employed. Such rules are normally derived from the implied terms and conditions of employment, legislations, agreements, practices and managerial policies and directives. The procedural rules govern how substantive rules are to be made and understood. Ultimately, the introduction of new rules and regulations and revisions of the existing rules for improving the industrial relations are the major outputs of the industrial relations system. These may be substantive rules as well as procedural rules.¹⁴ The context in the system approach refers to the environment of the system which is normally determined by the technological nature of the organization, the financial and other constraints that restrict the actors of industrial relations, and the nature of power sharing in the macro environment, namely, the society.

The Social Action Approach

The social action approach is a variant of the system approach. In the system approach, society plays a dominant role while the actors such as employers, employees and their representatives keep a low profile and play a passive role in the process. On the contrary, the social action approach assigns an active role to the actors of the industrial relations. The actors’ understanding of the work situation becomes more important than the social factors and their independent views gain a greater weightage in deciding their behaviour towards industrial relations. The social action theory primarily considers bargaining as an important tool for the resolution of a conflict. The actors, according to this approach, are willing to cooperate with other actors in the resolution of conflicts, and bargaining forms the basis for such cooperation.

The Marxist Approach

The Marxist approach looks at industrial relations from a societal perspective. It views industrial relations as a microcosm of the wider capitalist society. The basic assumption of this approach is that industrial relations under capitalism are an everlasting and unavoidable source of conflict. According to this approach, industrial conflicts are the central reality of industrial relations, but open conflicts are uncommon.¹⁵ The Marxist approach views industrial disputes as a class struggle and industrial relations as a politicized concept and an element of the class struggle. As per the Marxist approach, the understanding of industrial relations requires an understanding of the capitalized society, the social relations of production and the mechanism of capital accumulation.

The Marxist approach views the power relationship between the two classes, namely, the employer (capital) and the employee (labour), as the crux of the industrial relations. Both classes struggle hard to consolidate their respective positions so that they can have a greater leverage over the other in the process of bargaining. The proponents of this approach perceive that the employers can survive longer without labour than the employees can without work. As far as theory is concerned, the compensation payable to the employees is an outcome of the power struggle. For instance, the employers seek to maximize their profits by paying less compensation to the employees, while the latter resist such attempts, and this resistance results in industrial conflicts. However, the weakness of this theory is that it is narrow in approach as it views industrial relations as a product or outcome of the industrial conflict.

The Gandhian Approach

The core of the Gandhian approach in industrial relations is the utility of non-violence as a means of conflict resolution in organizations. The basic elements of this approach are truth, non-violence, the voluntary arbitration of disputes, and want-lessness. According to Gandhi, the growth of civilization does not mean a multiplication of wants; rather, it means a deliberate and self-imposed attempt to reduce such wants.¹⁶ He blamed the system, rather than individuals, for several evils of society. He insisted on treating workers as human beings and advocated the concept of trusteeship. He held the view that the employers should consider themselves as trustees or co-owners of the business, and not as sole owners. Similarly, the workers must not view the organization as something that belongs to exploitative owners; rather, they must treat it as their own property. They should also consider themselves as the trustees or co-owners of the organization. Gandhi approved the concepts of strikes, collective bargaining, trade unions, fixation of wages and workers’ participation in management.

Further, Gandhi held a definite view about the employees’ right to strike but insisted that it should only be the last resort for the employees. The employees can contemplate strike and that too in a peaceful and non-violent manner only after exhausting all other peaceful and constitutional methods of negotiation, conciliation and arbitration. Gandhi suggested a few guidelines for the industrial strikes: (i) The strike must be for a just cause and there shall be no strike without any grievance; (ii) It must be conducted in a peaceful and non-violent way; (iii) To the maximum extent possible, strike must be avoided in the essential services sector; (iv) As a prelude to organizing a strike, the trade unions must get ballot authority from all its member-workers for doing so; (v) Non-strikers must not be ill-treated or harmed. In essence, this approach emphasizes creating equality in the society through a non-violent approach.

The Human Relations Approach

According to this approach, an organization is nothing but a set of human relations and these human relations are central to how an organization functions. As per this approach, organizations are made up of people and the success of the management lies in its dealings with these people and their relationships to one another. The goals of the human relations approach are: (i) getting people to work, (ii) cooperating through mutuality of interests, and (iii) deriving satisfaction from the achieved relationship. The aim of the human relations approach is to make policies and techniques which can improve employee motivation, morale, efficiency and job satisfaction. This approach wants the small work groups in the organization to exert substantial control over its environment and assist the management in the process of removing the major irritants in the labour–management relations. It emphasizes group dependence and highlights the need for better communication, training and management development, recognition of workplace as a social system, group dynamics, and participative management in organizations.

Giri Approach

Former President of India V. V. Giri’s deep concern for the well-being of the working class made him write two popular books on labour issues entitled Industrial Relations and Labour Problems in the Indian Industry. According to him, in the tree of socialism, the root comprises human beings. Giri observed that “it is an essential condition to maintain mutual trust and confidence between the employer and employee to obtain the goal of rapid economic development and social justice.”¹⁷ The Giri approach in industrial relations focuses on the relevance and importance of voluntary negotiations between the employers and the employees as a means of settling disputes. This approach insists on the establishment of bipartite forums at different levels of the industry to wipe out the dispute between the employers and the employees represented by their unions. This approach also provides for the active involvement and intervention of the state in dispute prevention and settlement. However, this approach discourages compulsory adjudication and perceives it to be against the spirit of industrial democracy and unity.

Industrial Sociology Approach

The aim of the industrial sociology approach is to investigate the underlying trends and patterns in the cause and effect of industrial disputes both intended and unintended. Unlike most other approaches which focus only on the resolution of conflict as a means of achieving industrial relations, the industrial sociology approach focuses on the prevention of industrial conflict by tracing the cause of the disputes and then avoiding it. This approach provides a conceptual framework for investigating, analysing and specifying the structure and process within the organization that often produce conflicts. As per this approach, the job context and content, the technological characteristics, and human interaction often result in the distributive, structural, and human relations conflicts in the internal environment. In case these conflicts are not resolved within the organization, they may assume larger dimensions and become external conflicts. The removal of the causes of the disputes, according to this approach, facilitates a more effective maintenance of industrial relations.

Oxford School Approach

According to this approach, the conflict between the interests of employer and employee is inherent, but this interest can be adjusted in order that a common way, which can satisfy both the parties, can be found out, however difficult it may be.¹⁸ Productivity bargaining is a classic example of this approach. For instance, any agreement to increase the productivity can benefit both employer and employee. The employer gets better sales performance and profitability while the employees get increased earning. The underlying assumption of this approach is that ‘you can’t do much without income’ and therefore mutually beneficial ways must be found out for achieving convergence of interests. According to this approach, it is highly essential for the parties to the industrial relations to get the facts right and avoid institutional and other biases. The Oxford school approach can be expressed through the following equation:

 

where, r stands for the rules governing industrial relations; b means collective bargaining; and c refers to conflict resolution.

According to this approach, the primary responsibility for industrial relations lies with the management. It is the duty to of the management to devise ways and means for developing and introducing innovation in all the aspects of the organization which help the cause of industrial relations. However, this does not mean that there is no responsibility for the unions; this only means that the first responsibility lies with the management.¹⁹ Box 20.2 outlines the industrial relations initiatives of a joint venture.

Industrial Relations Trends

The advent of globalization and other economic reforms has brought in several challenges for the organizations on different fronts. Competition has intensified and the external environment has become too volatile to operate. Consequently, the knowledge, skills and ability (KSA) requirements of employees and the business strategies have seen drastic changes in the recent decades. The human resource management and industrial relations activities have been influenced by these factors. Additional developments in the industry are as follows:

• declining union memberships within the organizations, especially in the new and developing industries
• decentralization of collective bargaining with increasing preference for organization-wide wage negotiations and settlements
• increasing presence of knowledge workers and their changing needs
• the preference of the managements for free and direct communication with the employees
• diminishing presence of traditional manufacturing industries with high labour intensity and low technological penetration

All these developments have influenced industrial relations in varying proportions individually and collectively. As a matter of fact, even the traditional industries have modernized their production lines and supply chains to become lean organizations with the intention of reducing their dependence on labour forces.

Factors Influencing Industrial Relations

Basically, the success of industrial relations depends on the nature of the relationship prevailing among the actors of industrial relations. It also depends equally on the power equation existing between the employers and the trade unions. The attitude of one party towards the other and its strategies depend on its assessment of the strengths and weaknesses of the other party in industrial relations. The power equation of the actors in the industrial relations is determined by a combination of several factors. Some of the factors which influence the distribution of power between employers and employees are:

Trade Union Density

When the unions are phenomenally strong in an industry, the power balance would be in favour of the employees and the unions. In such a situation, the terms of industrial relations would be decided by the unions.

Frequency of Strike Activity

When the organization or industry reports a high number of strikes within a specific period, the industrial relations would come under increasing strain. Depending upon the outcome of the strikes, the power equation would change.

Political-economic Institutions

The role of politico-economic institutions is critical in achieving industrial peace and harmony. When the political institutions, especially the ruling combine, overtly favour the employees and the trade unions, the power equation would tilt in favour of the unions.

Cultural Diversity

When there is cultural diversity among the workforce, it may favour the employers to have divisions among the employees along cultural lines. The educated and enlightened employees may make independent decisions, which may differ with the general stand of the unions.

Demographic Structure

The presence of heterogeneous groups based on age, gender, income and other relevant bases can also influence the power balance between employers and employees. For instance, the organizations with a high proportion of women employees may witness low intensity in union activity.

Pattern of Behaviour

When the employers espouse authoritarianism in behaviour and style of management, the employees may predominantly prefer unions and aggressive postures, if possible. In contrast, the employees side with the employers when the latter adopt a consultative paternal approach.

In addition to these factors, the state of technology, the nature of supply and demand in the product and labour markets, legal factors, and other external environmental developments can also influence industrial relations. Having discussed the factors influencing industrial relations, we shall now see the measures required for enhancing their effectiveness.

Essentials of Effective Industrial Relations

Maintenance of harmonious industrial relations will benefit all the stakeholders of industrial relations like employers, employees, unions and also the government. However, the basic responsibility for fostering an effective industrial relationship rests with the management of the organizations. Thus, industrial relations is an integral part of the management of any business.²⁰ The management must provide due importance to the relationship in the form of effective consultation and good communication with the employees. A few factors contribute critically to the effectiveness of industrial relations. The role and relevance of these factors will be now discussed.

Leadership Commitment

Effective industrial relations require strong commitment and support from the management for the maintenance of harmonious industrial relations. The management must develop a kind of culture and philosophy which encourages change management through cooperation and consultation at all levels of the organization. It must also have a comprehensive procedure for bringing in changes in a systematized manner with due regard for the views of the employees and the unions.

Appropriate Vision, Mission and Business Strategy

The thinking of an organization and its priority for good industrial relations must be made known to all its employees. The management must make suitable changes in its vision and mission statements so that the managers comprehend the organizational policies clearly and pursue them keenly to the end that the industrial relations goals are achieved effectively.

Creative HR Policies

The HR policies of an organization have a profound influence on shaping its industrial relations. In fact, the employees form their perception about the industrial relations on the basis of the HR philosophy and policies of the organization. Thus, it is necessary for the organization to evolve forward-looking and dynamic HR policies which fulfil the changing needs of the employees and foster industrial relations.

Open Communication

An organization must develop a two-way communication channel to remain connected with its employees. An open communication system enables the management not only to keep the employees informed about the proposed changes but also to get constant feedback from them about its policies and actions. Two-way communication also facilitates the employees in sharing their suggestions, ideas and concerns with the management.

Institutionalizing the Relationship

In the long run, the management must develop a system for improving the industrial relations on a continuous basis. Intermittent processes like collective bargaining alone are not sufficient to develop the desired level of industrial relationship. The management must take measures for promoting the industrial relations at all levels of the organization. It must have forums like shop floor councils and plant councils for fostering the industrial relations.

Benchmarking Industrial Relations

Organizations must make every effort to fix standards or benchmarks for industrial relations so that the progress in industrial relations is properly monitored. Certainly, industrial conflicts like strikes, lock-outs and other forms of industrial disturbances are inversely related to industrial peace and harmony and, as such, can become the criteria for measuring industrial relations. Undoubtedly, the management must develop key indicators for measuring the efficacy of the prevailing industrial relations.

Summary

1. Industrial relations is a process through which an organization controls the employer–employee relations in the organization and this process may involve continuous communication and consultation between them.
2. The objectives of industrial relations are building cordial relationships with the employees, connectedness, safeguarding mutual interests, utilizing collective wisdom, preventing industrial conflicts, fostering industrial democracy, avoiding exploitation, and providing a dynamic role for the government.
3. The major players in industrial relations are the employers and their associations, the employees and their unions, and the government.
4. The approaches to the study of industrial relations are the unitary approach, the pluralist approach, the system approach, the social action approach, the Marxist approach, the Gandhian approach, the human relations approach, the Giri approach, the industrial sociology approach and the Oxford school approach.
5. In the unitary approach, the authority rests solely with the management with no right to anyone to challenge its decisions.
6. The essence of the pluralist approach is that the balance of power is not vested with any one group; rather, it is maintained between the parties to the industrial relations.
7. The system approach means that the behaviour, actions and role of the individuals are primarily shaped by the cultures of the society.
8. The basic elements of the Gandhian approach are truth, non-violence, the voluntary arbitration of disputes, and want-lessness.
9. The core principle of the Giri approach is that voluntary negotiations between employers and employees are the means of settling disputes.
10. The factors that influence the distribution of power between the employers and the employees are trade union density, frequency of strike activity, political-economic institutions, cultural diversity, demographic structure, and the pattern of behaviour.
11. The essentials of effective industrial relations are leadership commitment, appropriate vision, mission and business strategy, creative HR policies, open communication, institutionalizing the relationship, and benchmarking industrial relations.

Review Questions

Essay-type questions

1. Evaluate the role of the different actors of the industrial relations critically.
2. Describe any five industrial relations approaches using examples.
3. Write an essay on the relevance of the unitary and pluralist approaches with suitable examples.
4. Evaluate the contributions of India to the development of approaches for the study of industrial relations critically.
5. Discuss the trends in industrial relations in India with appropriate instances.
6. Enumerate the essentials of effective industrial relations with necessary examples.

Skill-development Exercises

Objective – The objective of this exercise is to show you how to identify and decide on the measures to be taken to improve the industrial relations in an organization with a view to improve the morale, motivation and cooperation of the employees.

Procedure Note – The class is divided into groups. Each group has (1) an HR General Manager, (2) an HR Manager at the plant level, (3) two union leaders, and (4) two observers of the meetings. The role of the observer is to observe the various aspects of the role-playing sessions and report on them.

Situation

Dinesh Cements Limited (DCL) is a large cement company with a good performance record. It has five cement plants located at five different parts of the company. Although the general performance of the company has been satisfactory, the major plant of the company located in a southern state of India has been facing intense industrial relations conflict. This particular unit witnessed nearly five major and nine minor strikes in the past five years. The labour–management relations have also remained at a low ebb with the employees and their unions citing poor communication and lack of consultation as the major source of irritants in the industrial relations.

However, the managers denied the allegations and blamed the workers’ nonchalant attitude and the militancy of unions as the cause of the industrial conflict. Sensing the urgency of the situation, the top management instructed the HR general manager to look into the matter and submit a report to it regarding the measures to be taken to improve the industrial relations at the plant.

 

Steps in the exercise

 

There are three steps in the exercise:

Step 1: The HR general manager meets the top union leaders (or select workers in a non-unionized organization) to ascertain their views on the measures required for improving industrial relations at the plant.

Step 2: He meets the HR manager of the troublesome plant to discuss and finalize the measures to be made for improving industrial relations.

Step 3: The observers the performance of the members in the role-playing session and give their feedback.

Case Study

Modern Cars Private Limited is a popular automobile company in India with a sizeable market share in the passenger-car segment. With an unassailable technological edge, it has a variety of brands in the market and each of them is performing well. The company has a committed and disciplined workforce numbering about 9,500, which includes managerial and non-managerial categories. The company enjoys an excellent rapport with the employees through effective communication and consultation. The fact that this company has witnessed no major industrial disturbance during the last ten years would vouch for its industrial relations policies. The HR department of the company is managed by Mr Sakul Ahamed, the General Manager (HR), while the industrial relations section is headed by Mr Altaf, Senior Manager (IR).

A few years back, the board of directors approved an ambitious expansion plan of the company. As per this plan, the company would enter the commercial-vehicle segment by offering competitive prices and taking over an existing company which meets its expectations. Six months back, the company got an opportunity to buy out Cellar Cars Private Limited, which is engaged in the production of commercial vehicles. It sent a team of six managers to study the culture, functions, performance and various other aspects of the company. The HR department was represented in the team by the industrial relations manager.

After an in-depth study of Cellar Cars Private Limited, the officials of Modern Cars submitted their report to the board for its further action. Although the majority of team members favoured the takeover bid, the industrial relations manager reported quite a few negative things about Cellar Cars. A high incidence of industrial conflicts including a few major strikes, a large number of unionized employees, the rigid attitude of the union leaders, a general distrust in the labour–management relations, and poor productivity were cited as areas of concern.

A perturbed board of directors sought the opinion of the general manager (GM) of HR about the HR report presented by the team. The GM (HR), after a close scrutiny of the report of the team, sought additional information about Cellar Cars. At the end, the GM (HR) gave the go-ahead signal to the board with the contention that the HR problems of Cellar were resolvable. In his report to the board, he held the style of functioning of the management, a lack of communication and consultation with the trade unions in the decisions involving changes, and outdated HR policies as responsible for the poor industrial relations record of the management.

Based on the report of the GM (HR), the board went ahead and completed the takeover successfully. As decided earlier by the Modern Cars board, quite a few managers of the Modern Cars were transferred to Cellar Cars. Some of them went on a temporary basis and others on a permanent basis. Modern Cars began to imbibe the new culture and the new work philosophy of Cellar Cars gradually. The workers seemed to be accepting the new environment and the culture. All was well for the Modern Cars management for a few months until the announcement of a strike by the union leaders of Cellar Cars over automation, performance-linked incentives and the consequent job losses. In spite of the efforts of the management to thwart the strike, the employees went ahead with their strike plan. The unions, with the active backing of external forces, have managed to prolong the strike and are continuously pressuring the management to withdraw its reform proposals. The strike has now entered its twenty-fifth day with no solution in sight and the beleaguered managements of Modern Cars and Cellar Cars are desperately looking for a way out of the mess.

Questions for discussion

1. What is your opinion about the developments in Modern Cars that led to the takeover of Cellar Cars?
2. From your point of view, whose report—Sakul’s or Altaf’s—is right and why?
3. What measures are now required to end the strike of Cellar Cars Private Limited?
4. Identify the long-term measures required to be taken to prevent future strikes at Cellar Cars Private Limited.

Notes

1. Michael Poole, Industrial Relations: Origins and Patterns of National Diversity (London: Routledge, 2003), p. 4.
2. Michael Armstrong, A Handbook of Personnel Management Practices, 3rd ed. (London: Kogan Page, 1988), p. 557.
3. Dale Yoder, Personnel Management and Industrial Relations, (Englewood Cliffs, NJ: Prentice-Hall, 1970, p. 19.
4. Ordway Tead and Henry Clayton Metcalf, Personnel Administration: Its Principles and Practice (New York: McGraw-Hill, 1920), p. 2.
5. C. Von Otter, Labor–Management Relations (2007).in G. Ritzer (ed), The Blackwell Encyclopedia of Sociology, Blackwell Publishing. Blackwell Reference Online; available at http://www.blackwellreference.com/subscriber/book?id=g9781405124331_9781405124331.
6. Jerome Joseph, Industrial Relations: Towards a Theory of Negotiated Connectedness (London: Response, 2004), pp. 1–3.
7. C. Faucheux and J. Rojot, “Social Psychology and Industrial Relations: Cross-Cultural Perspective” in G. M. Stephenson and C. J. Brotherton (ed), Industrial Relations: A Social Psychological Approach (New York: Wiley, 1979).
8. John E. Kelly, Industrial Relations: Critical Perspectives on Business and Management (London: Routledge, 2002), pp. 70–71.
9. A. Fox, “Industrial Relations: A Critique of Pluralist Ideology,” in J. Child (ed), Man and Organization (London: Allen and Unwin, 1973), pp. 185–233.
10. Norma Chalmers, Industrial Relations in Japan: The Peripheral Workforce (London and New York: Routledge, 1989), p. 10.
11. Norma Chalmers, Industrial Relations in Japan: The Peripheral Workforce (London and New York: Routledge, 1989), p. 10.
12. Gill Palmer, British Industrial Relations (London: George Allen and Unwin, 1989).
13. J. T. Dunlop, Industrial Relations Systems (New York: Henry Holt), p. 7.
14. J. T. Dunlop, Industrial Relations Systems (New York: Henry Holt), p. 20.
15. Richard Hayman, Industrial Relations: A Marxist Introduction (London: Macmillan, 1975), p. 190.
16. M. K. Gandhi, From Yervada Mandir: Ashram Observances, Translator: V. G. Desai, (Ahmedabad: Navajivan Publishing House, 1957), p. 24.
17. V. V. Giri, Labour Problems in Indian Industries (Bombay: Asia Publishing House, 1958).
18. Jeremy Bugler, “The Invaders of Islington,” New Society, (15 August, 1968): 226.
19. Jeremy Bugler, “The Invaders of Islington,” New Society, (15 August, 1968): 226.
20. Shaun Tyson and Alfred York, Essentials of HRM (Oxford and Woburn, MA: Butterworth-Heinemann, 2000), p. 263.