Mgt-485 17-1

Mgt 470CHAPTER 17

LABOR RELATIONS &INDUSTRIAL DEMOCRACY

Mgt-470 17-2

The U.S. Approach to Labor Relations

Collective bargaining by unions– To negotiate wages, hours, and working

conditions– NLRB– strikes

Grievance procedure Mediation and arbitration Importance of positive labor relations

Mgt-470 17-3

Labor Relations in the International Arena

Labor relations– Process through which management and workers

identify and determine the job relations that will be in effect at the workplace

– Specific approaches to labor relations varies from one country to another

U.S. Approaches to Labor Relations– Collective bargaining

Process whereby formal labor agreements are reached by union and management representatives

Involves negotiation of wages, hours, and conditions of employment and the administration of the labor contract

Mgt-470 17-4

Labor Relations in the International Arena (cont.)

U.S. Approaches to Labor Relations (cont.)– Union

Organization represents workers in collective bargaining Has the legal authority to negotiate with the employer and

administrator the labor contract Unions gain representation rights only after certification Unions can decertify a union with which the members are

dissatisfied Workers may strike to support union’s demands

– Grievance Complaint brought by an employee who feels that s/he has

been treated improperly under the terms of the labor agreement

Settlement of grievance attempted at various hierarchical steps

Mgt-470 17-5

U.S. Approaches to Labor Relations (cont.)– Mediator

Person who brings both sides together and helps them reach a settlement that is mutually acceptable

– Arbitrator Individual who provides a solution to a grievance that

both sides have been unable to resolve themselves and that both sides agree to accept

– Labor relations are important because they determine labor costs

Labor Relations in the International Arena (cont.)

Mgt-470 17-6

Labor Relations in Other Countries– MNCs have to adjust labor relations

strategies because host countries differ in terms of:

Economic developmentPolitical environmentsStrike activityRegional differences

– Great BritainLabor agreement is not a legally binding

contract– Violations of the agreement carry no legal penalties

Labor agreements are less extensive than in the U.S.

Labor Relations in the International Arena (cont.)

Mgt-470 17-7

Labor Relations in Other Countries (cont.)– Germany

Unions and management have been cooperative in the past

Labor harmony not adversely affected by unification of East and West

Union power is still quite strong Rights of workers addressed more carefully by

management– Japan

Unions and management have cooperative relationships Contracts tend to be general and vague Disputes regarding the labor contract usually settled

amicably Unions most active during the spring and end of the year

Labor Relations in the International Arena (cont.)

Mgt-470 17-8

How Industrial Conflict Is Handled Around the World– Strike

Collective refusal to work to pressure management to grant union demands

– LockoutCompany’s refusal to allow workers to enter the

facility during a labor disputeUnited States

– Most contracts outlaw strikes– Rely on grievance procedure to resolve

disputes

Labor Relations in the International Arena (cont.)

Mgt-470 17-9

How Industrial Conflict Is Handled Around the World (cont.)– Great Britain

Strikes more prevalent than in the U.S. System is not geared toward efficient resolution of conflicts Grievance handling is informal, cumbersome, and costly

– Germany Strikes and lockouts are prohibited while the contract is in force Contracts have different expiration dates Cooperation between union and management is not unusual

Labor Relations in the International Arena (cont.)

Mgt-470 17-10

How Industrial Conflict Is Handled Around the World (cont.)– Japan

Strikes and lockouts are very rareFew areas of disagreement between unions

and management

Labor Relations in the International Arena (cont.)

Mgt-470 17-11

Annual Average Days Lost Due to Labor Disputes in Economically Advanced

Nations: 1990-1999

Belgiu

m

Nether

lands

Britai

n

Sweden

Portugal

United S

tate

s

Germ

any

Austria

Japan

Switzer

land

Luxem

bourg0

50

100

150

200

250

300

350

400

Canad

a

Icel

and

Spain

Denm

ark

Finla

nd

Turkey

Italy

Norway

Austra

lia

Irela

nd

France

New Z

eala

nd

Mgt-470 17-12

Labor Relations in Europe

European firms typically negotiate agreements on a national level

European unions have more political power than those in the U.S.

Salaried employees in Europe are often unionized European unions have existed longer

Mgt-470 17-13

Labor Relations Around the World

Great Britain– labor agreements are not legally binding– labor agreements are not extensive

Germany – Unions and management have a cooperative

relationship– Union power is strong– Unions set the pay scale for 90% of workers

Japan– Social customs dictate union behavior– Disputes settled amicably– Unions most active twice a year

Mgt-470 17-14

Resolving Industrial Conflict

In the U.S. Strikes and lockouts are prohibited while an agreement is in effect

In Great Britain, strikes are prevalent

In Germany conflict is resolved similarly to the U.S.

Strikes in Japan have largely a symbolic meaning

Mgt-470 17-15

Industrial Democracy

INDUSTRIAL DEMOCRACY involves the rights of employees to participate in significant management decisions wages vacation work rules plant closings and expansions

Mgt-470 17-16

Common Forms of Industrial Democracy

Codetermination– Workers on Boards of Directors

Work councils– Workers elected to serve (common in Europe)

Shop floor participation– E.g. Quality Circles

Financial participation– E.g. Profit sharing (predominantly U.S.)

Collective bargaining

Mgt-470 17-17

Industrial Democracy in the U.S.

Problem solving teamsSpecial purpose teamsSelf-managing teams

Mgt-470 17-18

Labor Costs Around the World

Country Hourly Hours Compensation worked/

Week

Germany $31.87 29.0

France $19.34 31.7

Italy $18.08 35.0

U.S. $17.74 37.9

UK $14.19 35.6

Mgt-470 17-19

Real Wages of Low-Paid Workers

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

3U

.S. 1

980-

89C

anad

a 19

81-9

0A

ustr

alia

198

0-91

Fran

ce 1

980-

87A

ustr

ia 1

980-

91B

rita

in 1

980-

92D

enm

ark

1980

-90

Nor

way

198

0-90

Italy

198

0-87

Ger

man

y 19

83-9

0

Sw

eden

198

1-91

Mgt-470 17-20

Manufacturing Labor Costs (per unit of output, annual average percentage change:

1990-1997)

Dollar terms

Local currencies-5

-4

-3

-2

-1

0

1

2

3

4

Sw

eden

Ital

y

Sou

th K

orea

Can

ada

Fra

nce

Uni

ted

Sta

tes

Tai

wan

Bel

gium

Den

mar

k

Ger

man

y

Brit

ain

Nor

way

Japa

n

Mgt-470 17-21

New Labor Force Trends

Flexible working arrangementspart-time workersshift worktemporary contractssubcontracting

Joint partnering virtual corporations

Mgt-470 17-22

Closing thoughts International management will be one of joint

partnerships and agreements– Virtual corporation

Network of companies that exploits fast-changing opportunities and shares costs, skills, and access to global markets

Theories of international management must be continually subjected to review

An important question: “Why some MNCs do better than others?”– Strategic fit - aligning resources to match the

environment– Strategic stretch - use of resources to achieve more

challenging goals