Challenges of Pluralist Industrial Relations Paradigm, Workplace Changes in Australia - Case Study Example

Industrial relations xxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxx Date INDUSTRIAL CHANGE AND WORKPLACE CHANGE Introduction New developments in the human resource management and industrial relations have shifted the management of employments down to the level of the firm. This is because of the increasing complexity of changes occurring in employment relationships across organizations with regard to recruitment, acquisitions and mergers as well as downsizing (Blyton et al 2008). Additionally, as employees are now perceived as the most valuable assets in an organization, there is a growing need for proper employment relationships. As such, greater emphasis is being placed on managers to strike symmetry between employment relationships and commercial objectives. Frames of reference which refer to the value systems and personal assumptions held by management can predispose them to perceive work and workplace relations in a particular way. The essay seeks to determine some of the major changes that have occurred in the field of industrial relations in light of theories underlying the concept. It will specifically make reference to the challenges of the pluralist industrial relations paradigm and alternatives that have been proposed in its place. This is because the pluralist industrial relations theory has been in use for a long time and little has been detailed in literature concerning its shortcomings. Change in the workplace is inevitable. This is especially true with introduction of unions since 1980’s in Australia. The first part of the essay discusses challenges of the pluralist industrial relations paradigm. The second part will discuss some of the workplace changes that have occurred with introduction of unionism. The last part summarizes key findings from the essay. Challenges of pluralist industrial relations paradigm According to the pluralist industrial relations paradigm, conflict of interest is an inherent factor between employees and their employers in the course of their interaction in the imperfect labor market (Bray et al 2011). Characterizing the employment relationship is a bargaining problem between the stakeholders who are engaging in conflict of interest. As such, the outcomes of the employment are determined by the bargaining power possessed by each stakeholder. Perception of employment as a bargaining issue raises the questions of the rules governing the relationship between the employees and the employers as well as distribution of resources that govern the relationship. As a result, dispute resolution procedures, public policies, labor unions and corporations become key research subjects in pluralist industrial relations. Additionally, this model views managers, union leaders and employees as not only rational and economic agents, but also human agents whose behavioral elements in decision making processes is quite significant. Behavioral elements include habits, values, social and cultural norms, emotions and cognitive limitations. The pluralist industrial relation school of theory stemmed from the postwar neoclassical economic paradigm that was criticized for its lack of atheoretical fact gathering. Blyton et al (2008) maintains that critics of this neoclassical theory contend that it was clearly not a legitimate academic paradigm as it emphasized on facts without theoretical backing. For instance, this traditional industrial relations paradigm posited that employment outcomes are mechanistically determined by market forces and rational individual. Nevertheless, in accordance to theoretical foundations and in reality, careful analysis of the real-world practices and institutions are major hallmarks in industrial relations scholarship. Besides that, the pluralist industrial relations school of thought advocates for the equilibrium of labor and capital and discourages the dominance of one of them. It further states that prescriptions expressed by other industrial relations theories should be conscious of the relationships among the expectations of larger society, employers and workers and thus seek ways of achieving equitable and workable balance among these interests. Pluralists, for instance, see imbalances of income as a threat to economic growth as this prevents investment in physical and human capital and also depresses the purchasing power of consumers. Furthermore, behavioral elements of decision making can influence the manner in which an individual perceives fairness and this has a proportionate effect on industrial relations outcomes such as employee turnover and productivity. Therefore, a central ideology under the pluralist school is that the emergence and persistence of employment relationships is due to the fact that they strike equilibrium between conflicting interests of different stakeholders and not simply because they are efficient as portrayed by the neoclassical paradigm. Theoretical tenets underlying pluralist industrial relations are that employees are human beings and not commodities, labor markets are imperfectly competitive and there is an inherent conflict of interest between employers and employees. These assumptions yield a focal point upon which alternative industrial relations theories such as the critical industrial relations, human resource management and neoclassical economics have been developed to overcome the challenges of pluralist industrial relations. Neoclassical economics is founded on the principle that conflict is not necessarily an important construct as sellers and buyers in the commodity market engage in transactions that optimize their utility (Abbey 2005). Moreover, it proposes that people are involved in work to earn money for purposes of their consumption and leisure. The paradigm discourages competitive markets as they undermine checks and balances and maximize aggregate welfare as well. Joseph (2004) observes that human resource management on the other hand supports the unitarist view of conflict management whereby interests of employers and employees are aligned by employment practices and policies. The critical or Marxist industrial relations paradigm argument concerning employment relations conflict is founded on the maxim of ‘unequal power relations between classes throughout society’. Interplaying between the two paradigms is the pluralist industrial relations which are characterized by a number of competing interests- safe work place, employment security versus flexibility as well as higher wages versus lower labor costs (Kaufman et al 2004). These varying views of employment relationship conflict are imperative in the conceptualization of pluralist industrial relations. Pluralists relate closely to the human resource management school which embraces the use of laws and institutions such as unions to act as mediators and provide adequate avenues for dispute resolution and bargaining. Unlike Marxist industrial relations, pluralists view external environments as key determinants of workplace behavior and not embedded on a political realm of class-based conflict. The neo-classical model regards competition among firms, consumers, workers, suppliers and other stakeholders as a gateway to increased consumption, output and prices. In simpler words, the interests of all individuals subject to the employment relationship are fulfilled through competition. Equity and allocative efficiency are achieved as each of the factors of production is rewarded depending on their economic value and the voice of employees is heard through free entry and exit into and out of jobs. Unlike the pluralist industrial relations, the neo-classical paradigm is opposed to the opinion that the employers and the employee are equals interacting in a competitive market (Campbell and Pedersen 2001). Therefore, trade unions are monopolies that violate free entry of individuals into economic relations and also impede the operations of competitive. The human resource management paradigm is also opposed to the mediation of trade unions in the employment relationship. They are viewed a negatively adversarial and they add bureaucracy and detrimental conflict in the employment relationship. Contrary to this views, the industrial relations paradigm advocates for labor unions and collective bargaining. They are a platform for ensuring a balance between competing objectives in the employment relationship by preventing the foreman from taking advantage of the competing interests of the workers. By considering markets as imperfect, where employers have superior bargaining power relative to employee, unionizing employee groups is a natural solution to ensure a healthy balance in the employment relationship. Unionism consists of very legalistic and detailed union contracts that are enforced by quasi-judicial grievance procedure that essentially remove the right of employees to decision making in their respective organizations. In the view of the neo-classical paradigm, this is a distortionary restraint between the employer and the employee and could harm the profitability and productivity of an organization. However, the industrial relations and pluralist industrial relations paradigm hold that grievance arbitration, seniority rights and work rules provide justice in the workplace while maintaining management’s right to manage its workforce in accordance to the organizations policies. Therefore, unions might improve the social and the economic outcomes of an organization (Dzimbiri 2008). The issue of wage premiums is yet another feature of unions that is highly criticized by opponents of the pluralist industrial relations paradigm. The neo-classical paradigm for instance terms premium wages as another demonstration of the distortionary power of labor unions. In contrast, governments across the globe explicitly support the pluralist industrial relations paradigm by helping unions raise wages. While the economists and human resource management debates persist in the wake of increasing power of unions, the pluralist paradigm continues to reinforce its argument that unions are not only beneficial to organizations but also to individual employees and the general society( Budd 2004). Increasing competitive pressure is gradually replacing traditional collective bargaining power of unions with modern policies and practices to manage labor. These practices focus on adding more contingent workers, decertifying unions and slashing labor costs in order to improve the overall performance of an organization. Other policies that Hyman (2001) highlights include flexible working arrangements, job security, employee engagement, performance-based pay and work teams. These factors have prompted the emergence of a wide range of researches to investigate the effectiveness of the practices as opposed to the use of unions. The neo-classical economics and human resource paradigms argue on the basis of the efficiency of these policies and practices towards the productivity of the organization. Examples of questions that these paradigms would attempt to answer include do teams in workplaces yield better results than individual narrowly-defined jobs? Do engaged employees become more loyal and productive? Contrary to these view points, the pluralist industrial relations paradigm holds that human resource policies and practices have direct effect to employees and thus the organizational performance due to the existence of competing interests. It therefore, argues that productivity and profitability should be the only benchmarks to judge the success of human resource policies and practices. In what appears to be a win-win situation in the unitarist framework would be seen as management stress by pluralists as increasing the pace and effort of work would be done at the expense of security and rewards. Workplace changes in Australia Impressive workplace change has been experienced in most Australian companies subject to intense global competition. These organizations have had to grapple with major changes and developments so as to remain competitive. In addition, in the wake of increased investor’s power as a well new communication and information technologies, companies have been forced to adopt changes in their operations and processes. Examples of change that are in line with these forces of change include downsizing, reengineering, outsourcing, core competencies and offshoring (Lansbury 2000). Of concern when implementing the change is how members of the organization will accept the change. Thus, terms such as high performance, high commitment and high involvement have become part of management’s language during processes of initiating change. Even so, surveys indicate that most of the employees in Australia were not adequately consulted concerning key issues of workplace change that would affect them directly. They state that they were excessively exploited, highly stressed and overworked by management as it seeks to achieve positive results from the change (ACIRRT 1999). Workplace issues have been central in the Australian economic and political realms. This emerged after the introduction of the employment relations reforms which took place during the reign of the Labor Party between 1983 and 1996. The reforms gave birth to union movements which were aimed at moderating wages and thus reduce the intensity of inflation at the time. The Labor government also encouraged decentralization of employment relationship systems as well as flexibility in the labor market where non-unionized agreements were permitted to operate in workplaces. Taking over the government in 1996, the Liberal-National Party Coalition applied a more hard-line policy on employment relationships. The coalition advocated that workplace change should be driven by unilateral relationships between the employer and the employee and not though mediation by unions. Besides that, the government has continually supported individual growth or firm rather than collective arrangements. Lansbury (2000) asserts that introduction of unionism in Australia is clearly the greatest change that companies have had to adapt to in the recent decades. In this regard, certain industrial relation orientations have been central in ensuring that such changes are effectively implemented in organizations. The Hawke government abandoned the centralized policy and adopted a more flexible approach which is now dubbed as ‘managed decentralism’. Besides that the wage indexation system was replaced by the two-tier wage system in 1986 where companies were allowed to fix their wages depending on productivity on the enterprise and industry levels while keeping in line with the national wage adjustments. Another industrial relations orientation that continues to take effect to the present time is the structural efficiency principle. This principle was established by the motional Wage Case for the purpose of encouraging employers and employees to reach collective agreement on the standards of the employment relationship for instance reductions in demarcation barriers between different job descriptions, broad-based work classifications and multi-skilling. Introduction of this principle ushered in a period of great flexibility in the labor market. For instance, companies have been forced to adapt flexible working arrangements for their employees who are now predominantly young people. Supervision had been overly reduced among companies and employees are at liberty to work at their own pace as long as they deliver expected results and at the stipulated time frame. Additionally, in order to encourage multi-skilling, comprehensive training and development opportunities are provided to employees so that they can be adequately conversant with all the duties kin different departments. A compelling example that underwent massive changes as a result of the unionism in Australia is BHP Ltd., which is a major producer in the steel industry. The company had been guaranteed of an 80% domestic market share if it was willing to contribute a significant capital investment in the industry. Being aware that employees are the key drivers to productivity, the company worked in collaboration with trade unions to make changes in work practices, create dispute procedures and encourage voluntary redundancies. Besides that, management opened up avenues for employees training and development programs and ensured adequate consultation and involvement of employees at all levels of the organization. BHP introduces an off-site raining centre where workers would identify their job deficiencies and thus undergo relevant training (Kelly and Underhill 1997). Lean management is yet another industrial relations orientation that has taken root in lost of the Australian companies. This approach has seen management move away from closely defined job specifications to working arrangements that are more flexible. Teamwork is a present day buzzword among these companies as t is regarded as one of the easiest way to engage employees in the running of the organization. Although initially ambivalent about teamwork, unions have gradually embraced the concept as there are many evident positive results especially in the auto industry. Worker have an expanded role in the decision making process at the lowest level of the company which gives them a chance to make positive contribution concerning running of processes and operations. Conclusion Industrial relations, the world over, have indeed undergone impressive change. Pluralist industrial relations is a compelling example of the changes that have occurred in the field of industrial relations. The theory holds on the principle that competition between employers and employees is an inherent factor in the imperfect market; a factor that has been highly disputed by opponents of the paradigm, more notably the neo-classical theory. The pluralist school of thought encourages legalization of employment relationships through the unions. Contrary to this view, the neoclassical paradigm maintains that unions elevate conflicts between employers and employees and thus managers should be allowed to interact freely with their workers without necessarily having mediation of unions. The introduction of unionism among Australian companies has been a key driver of workplace changes and this has prompted a new industrial relations orientation. For instance, companies have been forced to employ strategies that will ensure adequate employee engagement, training and development as well as flexible working arrangements. References Abbey, R 2005, Is Liberalism Now an Essentially Contested Concept? New political Science, Volume 27, p. 461-48. Autralian Centre for International Relations Research and Training (ACIRRT) 1999, Australia at work: Just managing? Sydney: Prentice Hall. Blyton, N, Fiorito, J, and Heery, E 2008, The SAGE handbook of industrial relations. London: SAGE. 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An Australian review of public affairs. Volume 1, No. 1,pp. 29-45. Read More