International Human Resource

Management
Labour & Industrial Relations

Dr. Jerry John

 Labour and Industrial Relations (1)

• Labour and industrial relations is an important for all

organizations – especially for those commercial and non-
commercial organizations which are operating at the
international level
• Labour and industrial relations concepts differ according to
country and region and according to the type of industry
concerned
• The labour unions and associations in some countries yield
considerable power which can be used to their benefit in their
dealings with employers
• The evolution of labour or industrial relations, and the history
of trade unions, has been determined to quite a considerable
degree by the historical and ideological contexts
 Labour and Industrial Relations (2)
• Employers and organizations need to understand the
structural evolution of how labour unions in order to
effectively deal with them
• Lack of unfamiliarity with prevailing local industrial and
political conditions on the part of employers can have far-
reaching damaging consequences for the organization
• Labour and industrial relations policies of organizations
operating at the international level must be flexible and
take prevailing local factors, considerations and
requirements into account over time
Major Determinants of Labour and
Industrial Relations
Political

Ideological

Determinants Cultural
of
Labour & Economic
Industrial
Relations
Structural

Legal
 Labour Relations Strategies
• Due to the context-related differences, labour relations
systems differ between countries and, hence, the task of
managing labour relations should be handled decentrally.
• The headquarters of organizations operating at the
international level usually try to maintain some form of
coordination and control over the management of labour
relations. The level of involvement depends on numerous
factors and considerations
• Two fundamental reasons for the headquarters interest in
subsidiary labour and industrial relations are that
agreements made by subsidiary units may have possible
spill-over effects on the organization’s international plans,
and that they may create “precedents” for negotiations in
other countries
 Monitoring Labour Performance Across
Countries
• Most firms tend to closely monitor and compare
labour performance in their subsidiary units.
• Comparative labour performance data have the
advantage of yielding useful information as to
where, for example, new subsidiary units should be
established, where capital and investment should
flow to on a priority basis, and where production
capacities should be rationalized.
• Comparative data are especially useful in situations
where an organization has a spread of subsidiary
units which are undertaking similar activities
 Parent Organizations’ Involvement in
Labour and Industrial Relations
• Degree of Inter-Subsidiary Production Integration –
– Research indicates that a high level of production integration
between subsidiary units (for example, in a transnational
perspective, the production outputs of one or more
subsidiary units become production inputs for other
subsidiary units) determines a high level of centralization –
i.e. involvement by the parent organization in determining
labour and industrial relations throughout the organization
– A global coordinated labour and industrial relations policy
becomes an important factor in ensuring a successful global
production strategy, and with it, helps ensure the
organization’s growth and sustainability.
 Parent Organizations’ Involvement in
Labour and Industrial Relations (2)
• Nationality of Ownership of the Organization and
Subsidiary Units – The level of involvement by the.
organization’s headquarters in its subsidiary units’ labour
and industrial relations policy has been shown to differ
according to the ownership U.S organizations tend to
exercise more centralized control over labour and
industrial relations than organizations from the
European Union Reasons put forward to explain the
difference are that U.S. tend to be comparatively more
integrated, differences between U.S. and European
labour relations systems, and the more ethnocentric
managerial style of U.S. organizations
 Parent Organizations’ Involvement in
Labour and Industrial Relations (3)
• International Human Resource Management Approach –
The type of staffing approach utilized by organizations has
an effect on labour and industrial relations. Research
indicated that an ethnocentric approach is more prone to
labour conflicts than other staffing approaches.
• Experience of Organizations in Labour and Industrial
Relations- European Organizations have considerable
experience dealing with unions at the industry level (for
e.g. through employer associations), unlike U.S firms which
tend to deal with labour relations at the organizational or
firm level
 Parent Organizations’ Involvement in
Labour and Industrial Relations (4a)
• Subsidiary Characteristics – A number of subsidiary
characteristics have been found to be relevant in
determining parent organizations involvement in
labour and industrial relations:
– Subsidiaries formed through acquisition of well-
established indigenous firms tend to have more
autonomy than newly established units.
– The higher the subsidiary unit’s strategic importance for
the organization, and the younger it is, the more the
parent organization will seek to control its labour and
industrial relations policy
 Parent Organizations’ Involvement in
Labour and Industrial Relations (4b)
• If the parent organization is an important source of
investment or operating funds for the subsidiary unit, the
more the parent organization will tend to be involved in
labour and industrial relations, and the subsidiaries human
resource management policy.
• If a subsidiary unit does not perform up to the desired level
of expectation, the higher the likelihood that the parent
organization will seek to become involved in its labour and
industrial relations, especially if the poor performance is
linked to problems with labour
Parent Organizations’ Involvement in
Labour and Industrial Relations (5)
• Characteristics of the Home (Product) Market
– If the organization’s home market is large,
and most of its revenue is generated there,
then the organization would tend to regard
foreign markets as an extension of its home
market and would usually use home country
practices in dealing with labour and industrial
relations. This is typical for U.S. corporations
due to the size of the U.S. domestic market
Parent Organizations’ Involvement in
Labour and Industrial Relations (5)
• If the organization’s home market is small - as
is the case for many smaller and medium-
sized European countries – and the
organization depends mainly on foreign
markets for its revenue generation, then the
organization will be more likely to adopt its
labour and industrial relations approach to the
conditions prevailing in those foreign markets
 Parent Organizations’ Involvement in
Labour and Industrial Relations (6a)
• Management Attitudes towards Unions –
Historically and ideologically, managements have
evolved different attitudes towards unions:
– In the U.S., the traditional emphasis has been on the
importance of capital in the factors of production;
unions have traditionally been avoided, and the U.S. has
a comparatively low union-density rate, i.e. the
percentage of labourers and employees who belong to a
union. A consequence of this is that U.S. managers will
have less experience in dealing with unions than
managers in other countries– for example, in European
countries such as Great Britain, France, Germany and
Italy
 Parent Organizations’ Involvement in
Labour and Industrial Relations (6b)
• There has been a general trend away from unionization
throughout the world in the past couple of decades.
Reasons include:
• Reduction in public-sector employment
• Reduced employment in the manufacturing sector
• New forms of work organization
• Increased job competition and pressure on workers and
employees
• Legislative changes
• Collapse of the communist bloc
 Labour Unions Effect on International
Organizations
• Unions may have an effect on international
organizations in three ways:
– Influencing wage and salary Levels, resulting in higher
wages being paid and thus effecting the organization’s
cost-competitiveness.
• Constraining the ability of organizations to easily change their
employment levels, for example, by lobbying influential groups
such as legislators to pass laws (redundancy legislation) that
make the dismissal of workers and employees subject to
stringent conditions and an expensive undertaking for the
organization (redundancy allowance, compensation
programmes). Many countries have such legislation and the
corresponding judicial infrastructure in place
 Labour Unions Effect on
International Organizations (2)
• Hindering or preventing global integration or the
operations of international organizations, by compelling
international organizations to avoid integrating their
subsidiaries too much in order to prevent the potentially
damaging consequences which may be brought about by
potential labour and industrial disputes and demands. This
results in a suboptimal allocation of resources.
 Labour Union Concerns About
International Organizations (1)
• Financial Resources – International organizations
have more financial resources than unions, can
confront unions simultaneously in one or more
countries where they have their operations and still
be profitable overall.
• Alternative Sources of Supply – International
organizations can limit their vulnerability to labour
and industrial action by adopting a dual sourcing
policy and/or by switching production to other
facilities
 Labour Union Concerns About
International Organizations (2)
• Mobility of Production Facilities – International
organization’s may pose a threat to job security by
relocating facilities to other countries, for example,
where a more skilled workforce is available or
where semiskilled labour is cheaper.
• Lack of Information – Some unions may find it
difficult to understand the organization’s policies,
strategies and approach due to lack of awareness
and access to the requisite information.
 Labour Union Concerns About
International Organizations (3)
• Superior Knowledge and Expertise in Labour
Relations – International organizations often
have a repository of information, knowledge
and experience in dealing with unions which
they can utilize to their benefit.
• The Investment option – International
organisations may refuse to invest additional
capital into facilities in case of labour and
industrial disputes.
 Union Responses
• Unions have several options at their disposal to
enhance their bargaining power vis-à-vis
international organizations, for example:
– Establish institutional links and exchange information
through international trade secretariats.
– Legislative and political lobbying in order to improve
working conditions and pay (e.g. minimum wage, limit
on weekly working hours, discouraging the ‘export’ of
jobs to foreign countries)
– Exertion of influence on international corporations
through agencies such as the International Labour
Organization, the United Nations Conference on Trade
and Development, the OECD and the EU