Traditionally industrial relations (IR) focused and promoted collective employee relations through unions thus establishing standard terms and conditions of employment in an enterprise and sometimes across an industry or even economy. This was achieved by the intervention of states which introduced labour law. At this stage labour relation was viewed as a tool for resolving conflict between employers and unions. Moreover, the influence of unions and their collective power were great enough to effect changes in employment conditions and sometimes revision of labour law.
“IR fulfilled the function of providing employees with a collective voice, and unions with the means to establish standardized terms and conditions of employment not only within an enterprise but also across an industry, and sometimes across an economy. This was achieved through the freedom of association, collective bargaining and the right to strike” (Silva, 1997).
Today with the influence of globalization and ‘Human Resources Management (HRM)’ rather than personnel management there is a shift of focus in IR from collective to workplace relations. The new trend obviously will not be a smooth transition.
The objective of this paper is to deal with the changes in HRM and IR in their roles and focus and the emerging issues in both fields. This will be discussed under the following headings:
- Collective IR and Work Place IR
- Impact of Globalization on IR and HRM
- Conflicts of IR and HRM
- Harmonizing IR and HRM
Collective IR and Workplace IR
During the early days of free unregulated labour market there were problems of inequities and social injustices which necessitated the emergence of unions that could bargain in the name of the employees. Thus industrial relations (IR) were initially dealing with the imperfections of the markets which were external to the enterprises. This focus on collective bargaining taking place external to the organization between representatives of employees and employers was favourably accepted in the industrialized countries. One reason for was that a main point of conflict ‘wages’ was taken outside the organizations. This bargaining power given to the unions was sometimes used inappropriately as a political power in the developing countries. (de Siva, 1997)
With the changes in industry in late 1970s and the emergence of competition the external role of industrial relations represented in the unions started to weakened. Its power was mainly based on the strong market power of the United States when the major producers controlled the market and the American technology was the most advanced. In 1980s started the era of global competition and the influence on the labor market was reflected on the industrial relations. The role of the unions was no longer dominant. (Freedman, 1988)
Moreover, the external view of industrial relations only addressed the conflicts arising between employees and employers. Problems of employees related to the internal environment of the working are numerous and their effect on the performance of employees is not less important than those of disputes between the employer and the workers.
“However, regulation of the external labour market did not necessarily address all the causes of labour problems. A more pluralistic view recognized that labour problems or issues do not relate only to conflict between employers and employees. They include many other forms of problems such as low productivity, absenteeism, high labour turnover, lack of job security, unsatisfactory or unsafe working conditions, non recognition of performance in standardized wage systems, and lack of motivation. Many of these problems cannot be addressed through measures directed purely at the external labour market, and require measures to be taken within the enterprise” (de Silva, 1997)
Problems of the workplace cannot be addressed within the frame of collective relations through the unions; they rather need attention within the firm which necessitated a development in the roles of HR and hence the emergence of ‘Human Resources Management (HRM)’. Thus there was a major change in human resources management during 1980s. Pressure on management with rather new labour relations problems resulted in changes in industrial relation policies and as a result the new trends in human resources management that put more focus on the workplace relations. Indeed, “The problem is that there has been over-emphasis on the environment external to the enterprise, so that inadequate attention has been paid to the policies and practices needed within the enterprise” (de Siva, 1997).
At this stage industrial relations started to shape differently and was influenced by organizational psychology and behaviour which resulted a shift of emphasis from the traditional macro level at unions and governments level to the individual within an enterprise. Traditionally the unions looked at the individual as a victim needing assistance and protection from the collective body of unions. Today within the new employee relations trend the individual is “ …. an accomplice with management in an indifference to traditional industrial relations values and as less susceptible to the collectivism of representation which has been the unions’ strength hitherto ( Beardwell 1992b as cited in Beardwell, 1996).Therefore, there are important issues for the individuals other than the collective wages, e.g. job security, development, motivation etc.
Impact of Globalization on IR and HRM
Although some people are pessimistic about globalization, most of the scholars of Industrial relations (IR) and Human Resources Management (HRM) regard it as a beneficial process that is also inevitable and irreversible. Globalisation has facilitated great opportunities for development across the world though the process of development is not evenly distributed. According to IMF:
“Economic “globalization” is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization that are not covered here” (IMF Staff, 2000)
Benefits of globalization depend on how fast countries integrate with the global trends. On the other hands other countries that unable to integrate usually suffer more poverty and underdevelopment. An example of countries that managed to integrate well are the East Asian countries that integrated appropriately and consequently developed the economy and the societies and are now part of the developed world after being one the poorest areas 40 years ago. They are now more concerned with issues such as democracy and economically work standards and the environment.
Globalization was effected by the opportunities of foreign direct investments, liberalization of trade and the deregulation of financial markets. This dominance of the market system in addition to the information technology influences has facilitated globalization mainly in the areas of production and financial markets. The consequences were greater competition for investment and more of liberalization and deregulation. This also resulted in more of economic independence of nations and more of the flow of information, technology and capital. (de Silva, 1997)
In response to globalization employers had to react appropriately in order to benefit from globalization rather than facing negative effects. In many cases some of the major producers moved their production overseas aiming at cost reduction and to meet the requirements of local and regional markets.
An important phenomenon associated with globalization is contracting out and outsourcing. It is a common practice now that enterprises contract out all work that is not related to the main line of the company. The benefits for employees was also considerable as they now enjoy flexible working hours and workplace relations instead of the traditional collective relations.
“Employers are of the view that issues relevant to the employment relationship such as work re-organization, flexible working hours and contractual arrangements, and pay for performance and skills, are increasingly workplace-related, and should therefore be addressed at the enterprise level. In the USA collective bargaining has, with some exceptions, been very much at the enterprise level; in the UK there is a marked shift towards enterprise bargaining; and the trends in Continental Europe are also in that direction. In many Asian countries outside Australia and New Zealand, the relatively little collective bargaining has been mostly at the enterprise level. In New Zealand negotiation has in the 1990s been almost entirely decentralized, and in Australia the trend is in the direction of decentralization” (de Silva, 1997)
The main forces of globalization are the international competition and the advances in technology which is also one of the consequences of technology. These have effected tremendous changes in the roles and emphasis of HRM and IR. The role of the traditional IR has now been replaced by a workplace relations role which has also affected HRM and the approaches of both in responding to globalization has created a new employee relations service.
Globalization is not free of risks global wise and within countries. However, the global economic evolution is affected by globalisation though it is only one factor among others. In the evolution of economics as industry becomes mature, there is more demand for services and for more skilled workers. While there are a number of factors affecting the evolution of economy, the role of globalisation has been significant.
“In fact, globalization is actually making this process easier and less costly to the economy as a whole by bringing the benefits of capital flows, technological innovations, and lower import prices. Economic growth, employment and living standards are all higher than they would be in a closed economy” (IMF Staff, 2000)
These changes have challenged IR and HRM to respond to these changes appropriately and address the new market place demands as far as human resources is concerned. The trends of 1990s is a good example. As globalisation was being effected by international competition and the advances of technology, the operation of the “market place” was changed and also the production of organization. There was a strong demand for innovation and provision of the demanded product at the right price and the right time. (de Silva, 1997) As results employers and their organizations are required to innovate in human resources fields by developing and implementing new strategies, structures and processes.
Conflicts of IR and HRM
Ideally IR deals with issues related to the relation between the employer and the individual employee and that between the employer and unions and between them and the State which has traditionally been termed as ‘collective relations’. On the other hand, HRM is more concerned with management of human resources dealing with recruitment, training and development, benefits and compensation etc. Despite the fact that IR is more concerned with collective relations there is always an overlap between the two. For example, individual grievances can fall in the areas of both disciplines while collective disputes are clearly an IR issue.
Overlap is also evident in team building, communication and cooperation which, though an HRM initiative, have a relevance to collective relations. (de Silva, 1997) Yet IR practice and theory have not developed any theories with regards to team building as it regards it a loyalty to the organization rather than the union. On the other hand, IR has the role of negotiating and establishing the rules that govern employee relations whether they State laws or industry policies while HRM is more concerned with policies relating to recruitment, training and development, appraisal, motivation and issues of team building. Here while IR is more concerned with laws and rules HRM objective in prescribing policies is to establish the most effective use of human resources for achieving the organization objectives.
“Based on theoretical work in the field of organizational behaviour it is proposed that HRM comprises a set of policies designed to maximise organizational integration, employee commitment, flexibility and quality of work. Within this model, collective industrial relations have, at best, only a minor role” (David E. Guest, as cited in de Silva, 1997))
It seems that the main source of tension between IR and HRM is the individualized perception of HRM in contrast with the pluralistic one of IR. While both practices eventually benefit the individual, the approaches are different and the concept of benefit has two different meanings for them.
While the challenges discussed above relate to benefits of employees, both as individuals and unions, the other challenging source of conflict may arise at times when HRM finds redundancies inevitable for the competitiveness of the organization and may need to establish lines of direct communication with employees.
“Traditional IR and trade unionism can be challenged in other ways – that is, other than through anti-union activity. Downsizing the labour force as a HRM initiative to achieve competitiveness and offering monetary incentives to employees to improve productivity could create IR tensions, especially if the union has not been involved in the process. A similar result may occur when an employer, without seeking to dismantle existing IR practices, establishes other mechanisms and practices such as direct communication and consultation systems, small group activities, employee share option schemes and so on without involving the union” (de Silva, 1997)
Harmonizing HRM and IR
The main source of conflict between HRM and IR stems from the traditional practice of collective relations for IR and individualization for HRM. Therefore, any approach or resolving the incompatibility of MHR and IR should be an approach that results in more concern of IR with the workplace relations at individual level and that HRM should develop a concern for the external factors and the collective employee relations.
From the point of view of Industrial Relations IR the main concern is collective bargaining and the individual is identified only by his job title, seniority and age. Therefore, even when calculating remuneration it is based on a few elements that do not include the individual performance or behaviour. Since modern methods of HRM emphasise individualisation IR practice needs to adapt to the HRM practice and base future collective bargaining on individualization. However, integration in this area is not only the responsibility of IR but HRM should also expand its frontier to consider the external factors more than it does at present. (de Silva, 1997)
However, in order that harmonization effectively takes place a number of conditions have to be fulfilled. Both IR and HRM need to change their attitudes towards each other. Instead of HRM seen as the representative of the organization and IR the representative of employees a more positive attitude of both working for the welfare of the employees and the organization would be fruitful for all parties. This will also mean that IR by changing attitudes will be acknowledging that the growth of the enterprise is directly linked to the employees’ development. It will also be a recognition that productivity is in the benefit of both the enterprise and the employees thus looking at employer and employee interests as common and divergent. The next condition follows the previous ones obviously that both IR and HRM should accommodate each other and cooperate rather than defend against the other. Indeed, “A more strategic perspective of IR needs to be developed, going beyond including traditional objectives such as distributive justice. Such a perspective would need to place less emphasis on standardization and to espouse productivity and competitiveness” (de Silva 1997)
- Globalization effected by the international competition and the dramatic advances of technology has affected the “market place” and hence structures of enterprises, methods of production and the practice of This necessarily entailed a great impact on IR and HRM shifting the emphasis of the former to issues beyond collective bargaining and the latter to extend its practice far beyond personnel management.
- In the new era of globalization and information technology IR and HRM were challenged by the needs of the new industries, the new market and the highly skilled employees who now depend more on knowledge and professional The challenge made the scholar on both sides to research the problems and suggest the solutions.
- The urgent need is for more of flexibility on both sides so that they can adapt to the 21st century’s economies by changing their attitudes towards each other and working together for the growth of industries and the welfare of
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