2.7 Industrial relations
Full video class on YouTube, summary and notes on Instagram, class extracts on TikTok, text below. Have fun!
The main point of this class is to understand where conflicts come from, how employers and employees deal with them, and how to resolve them.
Sources of conflict
Conflict is an argument or disagreement between employers and employees. Most of the time, the sources of conflict are:
- Pay: employees aren’t satisfied with their salary/wage and request more whereas employers request more output and productivity for the same pay, which results in conflict.
- Working conditions: employees aren’t happy with the environment they’re working in or request an improvement in facilities while employers just meet the minimum legal requirements, which, again, results in conflict.
- Benefits: employees need a reason to stay motivated at a workplace and request certain perks that are not always provided by employers who traditionally prefer more work for the least pay possible. More about benefits here.
- Control: the more experienced employees are, the more they want to do their job the way they see fit whereas employers might request the job to be done the way they need. In addition, employees might not be happy with the degree of control from their superiors. Either way, it might result in conflict at a workplace.
Basically, regardless of the source of the conflict, it is most of the time caused by unmet needs and/or wants of either employers or employees.
In addition to the most common sources of conflict, there might be some more unique situations that relate to the things we learnt previously in Unit 2. Follow the links below to review the corresponding topics and see how they might become the sources of conflict at workplace:
- resistance to change,
- changes in organisational structure,
- incompatibility with certain leadership styles,
- demotivation,
- cultural clash,
- communication,
- conflicting objectives of different stakeholders.
The most appropriate business tool to identify the root causes of conflict at a workplace is Fishbone diagram. Check out the Toolkit for all the tools in IB Business Management.
Approaches to conflict
Employers and employees have different approaches to conflicts but one approach unites them both. This approach is called collective bargaining and it refers to management and employees having representatives who negotiate the terms and conditions of employment on their behalf. From the employees' side, the representative is usually a trade union — an organisation of workers that is created to protect their rights and interests. Employers/managers usually represent themselves or hire a lawyer or an agent as a representative. The reason why collective bargaining happens is because in large organisations it is impossible to account for all employees’ interests on an individual basis, it would require a lot of time. In addition, the main power of trade unions is numbers (i.e. the quantity of its members) and employees’ unity. Managers know that trade unions may put enormous pressure on them because they are united and would altogether be involved in different forms of industrial action (approaches to conflicts in the workplace), if employees’ interests aren’t met. However, being a member of a trade union means that you have to take part in industrial action even if you do not agree with it personally.
On the one hand, collective bargaining is convenient, because there is no need to meet with every single employee/manager to discuss industrial disputes (disagreements between employers and employees). Instead, representatives may negotiate on behalf of all employees or managers. On the other hand, collective bargaining means collective responsibility, which means that individual interests might be disregarded for the sake of the overall group interests. Collective bargaining is the most appropriate form of resolving industrial disputes in large organisations, where negotiating with every single employee and manager is not feasible.
Congratulations! You already know the first approach to conflicts that works for both employees and employers — collective bargaining. You can fill in the details about it in the table below and, as you read further through this chapter, please fill in the remaining cells in the table.
Now let’s discuss two employees’ approaches to conflict (in addition to collective bargaining, that we’ve already discussed): work-to rule and strike action. Don’t forget to take notes by filling in the table above.
Work-to-rule is an employees’ approach to conflict when they strictly follow the rules and contractual obligations and refuse to do anything beyond them. For example, if a teacher is on a work-to-rule, then he/she will only teach classes and mark homework, but not stay after school for meetings, events and extracurricular activities that are not included in the teacher’s contract. The teacher will not do a single thing beyond contract, if he/she is on a work-to-rule. In reality, both employees and managers always do more than they are supposed to, so usually a sudden work-to-rule makes a significant impact on the regular performance of an employee and on employer-employee relationships.
On the one hand, management gets pressured by a work-to-rule, which increases employees’ bargaining power. At the same time, job still gets done (even though at a slower rate) and the relationships with managers might not be ruined completely. On the other hand, work-to-rule might have no effect if employees’ extra duties are not essential to the organisation. Work-to-rule works well when employees want to put pressure on management but also secure their jobs and maintain a relatively good relationship with the management.
Strike action is an employees’ approach to conflict when they withdraw their labour and protest. It is a really effective way to put pressure on management, because managers do not achieve their objectives until they deal with a strike, because no output is produced while the workforce is on a strike. However, employees aren’t paid while they’re on strike and they might lose their jobs… Thus, strike action is appropriate as the last resort, when other methods don’t work, and when employees are desperate.
Two more employees’ approaches to conflict that aren’t included in IB Business Management course are go-slow (slowdown) and overtime ban. If you want to know more about them, follow the links and think about their pros, cons, and situations in which these approaches might be the most effective.
Now let’s discuss four employers’ approaches to conflict (in addition to collective bargaining, that we’ve already discussed): threats of redundancies, changes of contract, lockout, closure. Don’t forget to take notes by filling in the table in Figure 3.
Threats of redundancies is an employers’ approach to conflict when managers warn employees that their positions may no longer be required. Mind the difference between redundancies and dismissals: the former is when employee is doing the job well but his/her service is no longer required so the employee is laid off, the latter is when employee is not doing job well and is fired. So, a threat of redundancy basically refers to saying to employees that they are not that essential to the organisation and their position might no longer be needed.
On the one hand, threats of redundancies can be applied to unessential employees only, but have effect on the entire workforce, because other employees might think that they may be laid off too. On the other hand, according to Kotter & Schlesinger’s “change theory” that we learnt in 2.1, threats of redundancies would refer to coercion & manipulation, which might have a detrimental effect on employer-employee relationships and ruin the trust among managers and subordinates. This approach works well when an employee isn’t vital to the organisation and laying him/her off won’t have a significant impact on operations and performance.
Changes of contract is an employers’ approach to conflict that involves unilateral alteration of the terms and conditions of work (if allowed by law). Basically, it means that employers will change the terms and conditions of the contract without employees’ consent.
On the one hand, the degree of severity is flexible, which means that employers may control the extent of how serious the changes in contracts are. However, it might be hard to implement or even completely illegal in some countries. This area of industrial relations is usually regulated by the government. Otherwise, employers could always alter employees’ contracts in their own favour. This approach to conflict works when it is legal and feasible.
Lockout is the “vice versa strike”, when employers temporarily exclude employees from the workplace. On the one hand, employees aren’t paid, which gives bargaining power to managers. On the other hand, job isn’t done, there is no output produced, which is detrimental for both employers and employees. This approach works when the stoppage won’t have a severe effect on profits.
Closure is the permanent or long-term shutting down of the organisation. It’s the ultimate form of a lockout. On the one hand, it’s the most effective approach, because employees are under the enormous pressure of being at risk of losing their jobs. However, the future of the entire organisation is in doubt, so management is hurt as much as employees… This approach works as the last resort when other methods do not work.
If employees feel that they were treated or dismissed unfairly, or if employers feel that employees do not have a right for an industrial action, the dispute can be taken to a special court that deals with employment issues (in the UK it’s called industrial tribunal). Other methods of conflict resolution are discussed in the next part of class.
Conflict resolution
In this part of class we will discuss 4 approaches to conflict resolution:
- Conciliation and arbitration
- Employee participation and industrial democracy
- No-strike agreement
- Single-union agreement
The objective for this part of class is to discuss/evaluate approaches to conflict resolution, so I suggest you make notes using the table below, same as we did in the previous part of class. If you are able to fill in this table, it means you are able to evaluate approaches to conflict resolution.
Conciliation is an approach to conflict resolution whereby conciliator (a third party, not involved in the conflict; for example, a consultancy agency) offers a solution to the conflicting parties that is not legally binding. It means that the conflicting parties decide themselves whether they should pursue the offered solution or not. If they decide not to, there are no legal consequences. Arbitration is an approach to conflict resolution whereby arbitrator (again, a third party, not involved in the conflict) puts forward a legally binding solution to the conflicting parties. This way, the conflicting parties have to comply with the proposed solution. If one of the parties does not comply, the other party may call for a legal action and sue the party that violates the agreement.
On the one hand, when it comes to conciliation and arbitration, the third party gets involved, which means that the proposed solution to conflict resolution is likely to be objective and free from bias. However, arbitration and conciliation processes are time-consuming and not free. There is a fee, which can be substantial, depending on the severity of the conflict. This approach to conflict resolution is appropriate when conflicts can’t be solved internally.
Employee participation is an approach to conflict resolution whereby employees are involved in decision-making. Industrial democracy is an approach to conflict resolution whereby employees have voting rights either directly or through representation. These two approaches are merged into one because one is impossible without the other: if there is no industrial democracy, then employee participation is highly unlikely. And vice versa: employee participation is an indicator of industrial democracy. Overall, this approach suggests that employees are empowered to make decisions and organisation has to consult with employees when it comes to decision-making that affects the workforce.
On the one hand, it is motivating and can eliminate even the possibility of potential conflicts. If employees are part of decision-making, then there is a low chance that there will be a conflict that will have to be resolved. I would call this approach a method to prevent conflicts, not resolve conflicts, because it happens before the conflict, not after, as in the case with arbitration and conciliation. On the other hand, this approach is not applicable in some cultures, where employees do not have a say in how things are done and where employer takes care of everything. This approach is appropriate when cultural background allows for workforce to have a say in how things are done.
No-strike agreement is an arrangement whereby employees will not go on a strike during a contracted period.
On the one hand, organisation secures uninterrupted production if this agreement is made with the workforce. However, employees usually sign no-strike agreement only in exchange for certain benefits, which means that managers have to have something to offer to employees in exchange for a no-strike agreement. This method is appropriate when the organisation is able to offer something that prevents the workforce from strike action.
Single-union agreement is an arrangement whereby employees will be represented by a single entity only. For example, employees will be represented only by one trade union. It’s either one trade union, or no representation. Employees cannot choose between different trade unions if they signed a single-union agreement.
On the one hand, it is convenient because managers have to deal with one entity only. On the other hand, employees will be treated with “one size fits all” approach, which means that there is less flexibility in management of employees. If there is only one trade union that represents employees, then whatever agreement is achieved by managers and the union, all the members have to comply with it. Thus, this method is appropriate when employees are willing to sacrifice some of their personal interests in exchange for power in collective bargaining.
Let’s look back at class objectives. Do you feel you can do these things?
Make sure you can define all of these:
- Collective bargaining
- Trade union
- Industrial action
- Industrial action
- Industrial dispute
- Work-to-rule
- Strike action
- Threats of redundancies
- Changes of contract
- Lockout
- Closure
- Industrial tribunal
- Conciliation
- Conciliator
- Arbitration
- Arbitrator
- Employee participation
- Industrial democracy
- No-strike agreement
- Single-union agreement