17-1

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International Business

_____________s4hil____

Human Resource Management

strategy

Labor Relations and Industrial Democracy

17-2

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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

17-3

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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 he/she has

been treated improperly under the terms of the labor agreement Settlement of grievance attempted at various hierarchical steps

17-4

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Labor Relations in the International Arena (cont.)

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

17-5

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Labor Relations in the International Arena (cont.)

Labor Relations in Other Countries MNEs have to adjust labor relations strategies

because host countries differ in terms of: Economic development Political environments Strike activity Regional differences

Great Britain Labor 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.

17-6

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Labor Relations in the International Arena (cont.)

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

17-7

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Labor Relations in the International Arena (cont.)

How Industrial Conflict Is Handled Around the World Strike

Collective refusal to work to pressure management to grant union demands

Lockout Company’s refusal to allow workers to enter the

facility during a labor dispute

United States Most contracts outlaw strikes Rely on grievance procedure to resolve disputes

17-8

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Labor Relations in the International Arena (cont.)

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

17-9

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Labor Relations in the International Arena (cont.)

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

Strikes and lockouts are very rare Few areas of disagreement between unions and

management

17-10

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Figure 17-1 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

17-11

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International Structure of Unions

Intergovernmental Organizations International Labour Office (ILO)

U.N. affiliate, consisting of government, industry, and union representatives, that works to promote fair labor standards

Organization for Economic Cooperation and Development (OECD) Government, industry, and union group founded in 1976 that

has established a voluntary set of guidelines for MNEs

Transnational Union Affiliations International Confederation of Free Trade Unions

(ICFTU) International Trade Secretaries (ITS)

Focus on a particular industry

17-12

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Industrial Democracy

Rights that employees have to participate in significant management decisions

Common Forms of Industrial Democracy Codetermination

Participation of workers on boards of directors EU directive requires all companies with more than 50

employees by 2008 to “inform and consult” workers’ representatives about company strategy

Works Councils Result of either national legislation or collective bargaining Function to improve company performance, working

conditions, and job security

17-13

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Industrial Democracy (cont.)

Common Forms of Industrial Democracy (cont.) Shop Floor Participation

Variety of approaches available (e.g., quality of work life) Financial Participation

Profit and productivity sharing Collective Bargaining

Can be a mechanism to obtain industrial democracy

Industrial Democracy in Selected Countries United States

Collective bargaining is the most common form Problem-solving teams

Employee groups that discuss ways of improving quality, efficiency, and the overall work environment

17-14

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Industrial Democracy (cont.)

Industrial Democracy in Selected Countries (cont.) United States (cont.)

Special purpose teams Employee groups that design and introduce work reforms and new

technology

Self-managing teams Employee groups that take over supervisory duties and manage

themselves

Great Britain Collective bargaining and reliance on teams

Germany Industrial democracy and codetermination are very strong Work councils perform a number of important functions

17-15

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Employee Participation in All Levels of Danish Firms

Board

Director(s)

Upper/middle management

Employees

PartlyAutonomous

Groups

Trade union club

Shopsteward

Safetycommittee

Cooperationcommittees

Safetygroup

17-16

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Industrial Democracy (cont.)

Industrial Democracy in Selected Countries (cont.) Sweden

Industrial democracy geared toward ensuring the quality of work life

Workers sit on some boards of directors China

Little known about industrial democracy in China Two policy-making committees within Chinese enterprises

Japan Industrial democracy used to enhance workers’ performance Quality circle Enterprise unions

Represent both the hourly and salaried employees of a particular firm

17-17

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Strategic Management of International Labor Relations

Philosophical Backdrop MNEs can use a number of starting points for their

approach to labor relations Ethnocentric Polycentric Geocentric

Labor Costs Wages differ greatly from country to country Sweatshops are common throughout the world Hours worked are inversely related to hourly

compensation High paying jobs are transferred to low paying regions

17-18

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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

17-19

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Strategic Management of International Labor Relations (cont.)

New Labor Force Trends Companies are trying to regain lost competitiveness

due to high labor costs When national values collide with the realities of global

competition, the latter is likely to win Major industrial countries will have to increase

immigration to have the workforce to maintain economic momentum

Increased reliance on flexible working arrangements that contain costs and link work demands with employees Part-Time Work

Most widely used form of flexibility in Europe

17-20

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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

17-21

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Strategic Management of International Labor Relations (cont.)

New Labor Force Trends (cont.) Flexible working arrangements (cont.)

Shiftwork Popular in Europe

Nonpermanent Employment Temporary employees Fixed-term contractual agreements

Subcontracting Replace employment contracts with commercial contracts Many creative subcontracting approaches

Organizing International Industrial Relations Degree of centralization-decentralization control Degree of employment flexibility

17-22

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A Final Word

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