Actions of Managers during Current Economic Scenario Worldwide - Coursework Example

Introduction The current economic scenario worldwide is slightly depressing. With several great financial setbacks, the economy’s financial vigour has deteriorated to quite an extent. This financial pressure has shrunk the market’s demand-supply cycle which has had severe effects on organizations whether big or small, and also on the employees associated with them. With lower demands for products, surplus labour employing organizations have a labour-to-work mismatch. These circumstances give rise to a situation where there is a sudden decrease in workload but the workforce strength is constant if not increasing. As primary targets of this downturn, the organizations operating and running businesses in the economy struggle to maintain profits and to manage the cost structure of the organization. It hence becomes evident that organizations would want to have a re-look at superfluous and redundant resources including human resources. This situation thus gives the managers of these organizations, an opportunity to negotiate and re-negotiate their terms which was otherwise not possible in a booming economy with a huge demand for skilled labour and manpower. However, when it comes to the human component of any organization, especially the workers and labourers; an altogether new and distinct aspect of Industrial (or Employee) relations come into limelight. Unlike the inanimate resources of a business such as raw materials, inventory, machines, infrastructure, budgets etc., the process of management of living resources such as its working population is not a very linear, one-directional and straightforward task. It involves several nuances of trade union associations, industrial legislations governing employer-employee relations and so on. Consequently, it is appropriate to undergo an in-depth analysis and study of the various labour management strategies, policies and procedures, keeping in mind the interventions of all the above mentioned factors. With this essay, an attempt has been made to justifiably present the various decision alternatives that exist for managers of an organization facing such labour management issues. Management and Employee Relations (MER) Theory and Context Employment relations is a term used to describe the association between the representatives of employee and the representatives of employers (See Figure 1) including all aspects of work and employment between the parties involved in the contract for employment (Yoder, 1977). Industrial relation maintains a balance between feasible solutions, conflicting objectives, incentives, economic security, discipline, industrial consensus, authority, autonomy, bargain and cooperation (Lester, 1964). Figure 1: Industrial Relations and associations The existence of several entities when it comes to dealings in industrial relations brings into light, a multi stakeholder perspective. Industrial relations are affected by several factors such as Institutions, Economy and Technology. Institutional factors refer to government policies, labour legislations, collective agreements, employee courts and associations such as community, union, value systems, etc. Economic factors deal with the market condition (demand and supply forces), structure of labour market and market nature (capitalist, socialist, communist or mixed). Finally, technological factors which affect industrial relations are the introduction of automation, computerization, rationalization etc. Importance Industrial relations between labour and management should be harmonious to achieve industrial peace and increase productivity. Relations which are not cordial develops discontentment and gives rise to abrupt conflicts. Government does have several judicial and arbitrary procedures for dispute resolution; however, it is better to promote openness, trust and collaboration among labour and management so as to handle everyday affairs without getting into burdensome legal intricacies. Role of Institutions The representatives of employees are generally a collective organization which has a social existence and has well defined policies and frameworks for ensuring the welfare of the workers in corporations. These groups of collectives are commonly known as ‘Trade Unions’ (Shister, 1946). The employees become a member to such unions and thereby have their employment rights being negotiated by these unions with the employer and their management. These rights and terms and conditions vary from work environment (health, safety and hygiene), work timings, leave and holiday requirements, wages and bonuses, fair dismissal case, continuance of employment and so on. Although, environment such as these, where employees are affiliated to a particular group called unions, is a unionized environment; situations involving arrangements and negotiations between an individual employee, worker or labour with the employer also falls under industrial relations even though it is a non unionized situation. State has also played a major role in industrial relations both as an initiator of policies as well as an employment generating body as a large public sector. Some universal IR legislations Reduction of compulsory adjudication and government intervention in industrial relations Encouragement to registration of unions, union membership fee enhancement, educating workers of their rights and discouragement to outside representation as union executives Compulsory recognition of union Penalty for unfair labour practices Legal authorization of collective agreements MER Process The management of employment relations involves several voluntary, governmental and statutory measures. Voluntary methods like collective bargaining, trade unionization, joint consultations or participative management, standing orders, grievance handling mechanisms and codes of discipline put in place by the employer within the organization ensures internal harmony. Also there are several statutory measures such as works committee, conciliation officer and board, arbitration and adjudication like labour courts, industrial tribunals and national tribunals. Even after the implementation of voluntary employment relation measures and the presence of several statutory measures, if the industrial relation still goes out of control, then, the state and central level government labour administrative machineries come into play. Negotiations: During economic downturns Describing in simple terms and in the context of this essay, when one party (such as the company management) interact with another party (the employees and their union) so as to reach a mutually agreed solution to a problem posed at the start is known as negotiation. History has seen that negotiations between unions and management have been inclined more towards the favour of workers, with significant benefits reaped by them in the form of extra holidays and sick leaves, insurance and other benefits. However, competitive pressure and cost saving efforts by organizations during poor economic conditions have forced companies not to yield ground beyond a point. As is seen, the economy slowdown around the world has significantly affected the demand for numerous products/services. This decrease in demand have hit the bottom-line of companies and significantly reduced their profit margins. These fall in demand and profits have made it imperative for organizations to rearrange their priorities. The focus has drastically shifted from an aggressive expansion mode to a cost cutting and more conservative approach. Avenues for limiting surplus expenditure in resources are constantly sought and superfluous investment is being curtailed. This attitude invariably also extends to Human resources. And managers seek to negotiate deals with their labourers so as to meet the change in organization’s objective. Employees, workers and labourers are well aware of organizations’ change in focus as well as strategy. Moreover, the situation is not limited to a single organization but majorly throughout all organizations. The resultant shrink in demand for labour in the industry leads to a position where employees, unions should be more than willing to enter into negotiations with their employers to secure their position. Customarily, during these negotiations, employers (managers in negotiation) have an upper hand as compared to employee associations. Here comes the concept of ‘Collective Bargaining’. Collective Bargaining Bargaining is a form of negotiation which involves discussion, debates and arrangements with regards to terms and conditions of service and employment and might consist of negotiations on wage, work hours, targets, productivity etc (Chamberlin & Kuhn, 1965). It is in a way, rule making through agreements between employees and management. It is thus a bipartite process. It is usually seen that there is an existence of ‘Power Equation’ during these bargaining sessions. Workers want to gain maximum from management, and management wants to extract maximum from workers by offering as little as possible. To arrive at a compromise, both have to withdraw from such rigid positions and take less than what was asked for and provide more than what was offered. This way, management attempts to maintain control over workplace issues and unions attempt to strengthen their hold over workers (Carrell & Heavrin, 2001). Collective bargaining process The various steps involved are (Mills, 1994): 1. Identification of the problem: In this case, the problem is excessive competitive pressure for cutting overall organization’s cost for its survival. 2. Collection of data: Data like current economic forecasts, cost of living trends, competitive terms offered by rivals etc. need to be gathered. 3. Selection of negotiators: Managers who are effective negotiators with sound knowledge of union negotiations, economics, labour laws etc. are essential. 4. Climate of negotiations: A climate of mutual trust and no hostility should be fostered. 5. Bargaining strategy: It is to be decided by the negotiators on what type of stand would they want to take during the process: Competing, collaborating, accommodating or avoiding and their respective bargaining zones. 6. Formalising the agreement: Preparation of a formal document with an acceptance of both the parties. 7. Enforcing the agreement: This involves effective adherence of both the parties to agreed terms. Negotiating/Bargaining options for Managers and respective outcomes Managers while negotiating with the employees have four distinct types of bargaining options: Conjunctive, Cooperative, Productivity and composite bargaining. (Fosson, 1999) I. Conjunctive bargaining: It is also known as distributive bargaining process where managers try to maximise their gains and so do employees. It is a zero sum game in which loss of one party is a gain for the other. In times of poor economic conditions, with the bargaining power of employees having reduced to quite an extent, it can be easily envisaged that managers would turn out to be the gainers in this deal if such a negotiation does happen. II. Cooperative bargaining: This refers to a flexible approach towards the negotiation process. Both the parties in view of the mutual inter-dependence and need of the hour accept the authority of the other and in result, leading to positive compromises and accommodation for both the sides’ requirements. III. Productivity bargaining: This method is used by managers to link workers’ wages and other benefits to their productivity where a standard productivity index is decided upon. In conditions of deteriorating economy, it is quite likely that the managers would want to deal with such negotiations as it would provide them with an opportunity to manage costs through linking payment with the actual productivity and targets achieved. IV. Composite bargaining: In this approach, employee unions bargain for wages as usual along with demanding equity. This equity is seen in terms of working norms, employment levels, manning standards (ensure that the existing workload does not increase even if wages are linked to productivity), environmental hazards, subcontracting clauses (prevention from distributing business to other divisions) etc. However, for survival, big companies like automobile giants etc. have reduced workforce or cut down their benefits in recession-hit times. Best strategic negotiation alternative When companies are hit by recession, they cannot afford the demand for wages and benefits as demanded by workers. Simultaneously, they also cannot survive through these difficult times without the support of its labour and workforce (Woodworth, 1983). Employees are in equal need for support and job security from their employers. In this situation, it is the best strategy to negotiate in a flexible manner keeping in view the need to survive in difficult times. Consequently, a collaborative approach towards negotiation known as ‘Cooperative bargaining’ (explained earlier) will be best aligned with the labour management practice of organizations for long term sustainability. Labour may accept a cut in wages in return for job security and increment in wages when the conditions improve (Mitchell, 1982). This marks a win-win solution and represents a positive sum game (A gain for both the parties in negotiation). This makes the negotiation not a competitive but a joint problem solving exercise where parties make concessions in what they consider unimportant or relatively costless, in exchange for their valuable or more important goals (Sloane & Whitney, 1994). Conclusion In conclusion, it can be confidently argued that even though recessionary times pose serious challenges to the survival of organizations and a consequent pressure on the labour resources; the managers of those organizations are always well equipped with several options to effectively handle and mitigate the labour concerns. This essay explains and elaborates the various MER (management employment relations) techniques and negotiation practices. The essay also highlights and illustrates several such negotiation alternatives available to the managers of such organizations and also an overview on which of these would be best suited to organizations’ long term survival and labour management. Read More