Managing the Employment Relationship - Research Paper Example

Table of Contents 1. The rise of trade unionism 1 2. Small firms 2.1 Employee involvement 2 2.2 New management initiatives 3 2.3 Small firms and labour instability 5 3. Government initiatives 6 4. Trade Unions 4.1 Importance of trade unions 6 4.2 Problems at non-union firms 7 5. Formal HR practices 8 6. Conclusion & Recommendations 6.1 Conclusion 10 6.2 Recommendations 11 References 12 1. The rise of trade unionism The 1990 Workplace Employees Relations Survey (WERS90) found that two-way communication has been effective in enhancing productivity levels. Unionism had a negative influence and in fact strong union representation can generate worse outcomes. However, union recognition has a positive effect on productivity change (Addison & Belfield, 2001). Trade unions look after the interest of their members but they also recognize the advantages of working in partnership with the employers. A recognized trade union means that the firm can negotiate the terms and conditions of employment with the union instead of negotiating with individual workers (BIS, n.d). However, the firm has the option to include only certain categories of workers. Firms are also obliged to disclose terms of employment to the recognized trade unions. Recognizing trade unions give a single point of contact which is beneficial for the employers. Having a recognized union has other benefits. The workers are likely to be more involved in the running of the business. It also enhances trust and commitment among the workers. Since the trade unions represent several businesses in different industries, they have a wider perspective and experience in dealing with worker issues (BISa, n,d,). Small firms have limited exposure and hence can benefit from the experience of the trade unions. The unions are also a reliable source of legal and good-practice advice on HR issues and employment law issues. During collective redundancies or employment transfers, this expertise can be very useful. If the trade unions get to feel that the organization is keen to understand the workers’ concerns, these unions help to reach the firm’s message across to their members. 2. Small firms 2.1 Employee involvement Employee commitment has been suffering at the recently expanded small firm which is due to lack of employee involvement. Non-union firms have no compensating investment in employee involvement and small businesses face numerous challenges in the process (Bacon, Ackers, Storey & Coates, 1996). Employee involvement can give sustained competitive advantage to firms both large and small (Chiu, 1999). This requires a change in the attitude of managers or entrepreneurs as authoritative and dictatorial attitude does not work any more. As the number of employees has increased recently, the management needs to understand the employees’ needs and hence a platform for employees’ voice has to be provided. In small firms, the manager/owners are reluctant to part with authority and responsibility and most prefer an informal management style (Matlay, 1999). The employee relations in such firms tend to depend on the characteristics, personalities and the preferences of the owners. The informal management style results in amicable solutions to grievances. However, as firms grow in size, change in management practices becomes inevitable. This transforms the small, personalized, flexible, knowledge-based firm into a larger, more formal, economically powerful corporation (Reid & Adams, 2001). The employee relation in small firms is dependent on two concepts – the dependence of employers upon particularly the skilled workers and the ability of the workers to resist the exercise of management control (Liff & Turner, 1999). In fraternalism the employer and employee work side by side for similar wages, with high trust level and limited supervision. In paternalism the workers have less mobility while in benevolent autocracy there is low level of mutual dependency. Sweating exists in situations where the workforce has no choice of alternate employment and the employer has no particular need for the employee concerned. Other types of culture in family-owned firms include laissez-faire where the employees are given more scope and considered trustworthy and participative or team working as the power of the family is downplayed (Harris, Reid & McAdam, 2004). Any form of employee relations work unless competitive forces and the growth of the firm compel the management to improve their employee relations. The purpose of any form is only to increase employee involvement 2.2 New management initiatives To achieve the business objectives it has become important for the small firms to adopt the HR practices in recruitment, development and retention of employees. This is more important for firms that have higher proportion of skilled workers. Small firms need to collaborate and exchange knowledge on HRM practices. To reduce isolation, they should also be affiliated to some business associations like the Learning and Skills Council (Bacon & Hoque, 2005). The small firms have experimented and adopted new approaches to management which include features such as culture change, devolved management, team working, flexibility and quality task forces (Bacon, Ackers, Storey & Coates, 1996). While they have several disadvantages such as lack of resources and management expertise, but they have been pursing the changes in an informal way. These initiatives have resulted in positive outcomes even though they do not know of HRM as a management theory. Using consultants did not fetch positive benefits to the small firms. Because of friendly relations, it is assumed that there is no need for collective representation of the workers (Dundon, Gruglis & Wilkinson, 1999). Small firms have started formalization of people management procedures. For instance, they focus on role clarity and seek a greater contribution from employees (Bacon, Ackers, Storey & Coates, 1996). In small firms they attempt to change people by informal pressure. They focus on bringing about culture change in the work attitude but through informal measures. Even though devolvement has been considered a necessity in small firms, they have difficulty in implementing it. Devolving enables the owners to focus on core issues and not remain entangled in routine business activities. Team work in small firms means working as a tightly knit community. These informal and organic measure are more authentic than the bureaucratic approach of larger firms. Small business firms can easily adapt to change. 2.3 Small firms and labour instability While it was previously believed that small firms offered several benefits such as direct communication, low labour turnover and fewer industrial disputes, it was later found that smaller organizations experienced more labour instability (Bacon, Ackers, Storey & Coates, 1996). The small firms have been categorized as “bleak house” or sweat shops that are dictatorially run and employees are satisfied because nobody complains (Wilkinson, 1999). The small firms are believed to provide a better work environment, with greater flexibility, lower levels of conflicts and disputes and friendly communication. Small firms lack resources and there is absence of specialist panel to advise them on HR practices. Once the number of employees in small firms is more than 20, the informal management styles become redundant and ad hoc responses to personnel issues create problems. Management has to be professionalized and responsibilities delegated. After labour market deregulation, the owners’ potential for strategic choice in managing human resources has increased, which makes them reluctant to allow unions at workplace. Small firms have started experimenting new initiatives and innovative and progressive employee relations practices are no more restricted to larger firms. This has led to greater commitment by managers in the small firms. Small firms have been adopting EI techniques to enhance employee commitment. 3. Government initiatives The situation since the 1990s has undergone a change as the UK government has been trying to improve the overall productivity and the survival of small firms through the introduction of 200 support measures (Bacon & Hoque, 2005). Sophisticated HRM measures such as Small Firms Initiative and Investor in People (IiP) have been found to be central to the development of the sector. Iip in the UK resulted in better commitment of workers, increased productivity and better quality of service (Kidger, Jackson-van Veen, & Redfern, 2004). The ACAS model sets out factors that help a company to understand if their approach to employee relations is on the right track or if they need to make amendments (Acas, 2005). Te model comprises of formal procedures for addressing grievances and disputes that both managers and the employees should be aware of. Managers should genuinely consider the views of the employees which can serve to encourage the employees through motivation and involvement. Overall, the guidelines set in the Acas model helps to improve business performance. They recommend a formal procedure for settling disputes and they provide training in negotiating skills. 4. Trade Unions 4.1 Importance of trade unions More than employees’ association, other external influences such as trade unions can have greater effect on the adoption of HRM practices in small firms. Trade unions constitute coercive networks and such coercive networks create institutional pressure (Bacon & Hoque, 2005). Coercive networks may not sufficiently improve HR practices but they do have a positive effect. Union recognition is important in small firms particularly where formal induction, grievance and disciplinary procedures are concerned but non-union forms have less of such forma policies (Dundon, Gruglis & Wilkinson, 1999). Non-union firms are more likely to encounter health and safety problems and implement compulsory redundancy. Unions bring with them this knowledge and experience and hence it become easy for the small firms to adopt these changes. Small firms are unlikely to take external advice without coercion. 4.2 Problems at non-union firms Dundon, Gruglis and Wilkinson (1999) also support the view that the small firms need to be exploitative and take the state support to extend voice to the workers. Small firms’ employees need union protection even though the workers do not display a propensity to unionise. The firm in question, now having over 100 employees, would have to maintain statutory rights such as those set out in the Employment Relations Bill or European Works Council. This is also in view of the findings that family control can be paternalistic and authoritative. Even though small firms claim to have friendly and smooth communication with the workers, workers contend that they do not receive adequate information from the management. Pay in small firms is usually set by the management without any negotiations and is only marginally above the minimum standards (Dundon et al; Forth et al). No-work no pay policy deprives the workers of sick leave in small firms. Such policies lead to lower commitment and organizational loyalty from the workers. Unions can bring about benefits both for the worker and the firm as they work as conduits of change. Workers would like union affiliation but are also scared of management reprisals. The management has to shed the anti-union sentiments so that workers can feel at ease when affiliating with recognized unions. Managers that deal with personnel matters in small firms may not have formal qualification and may spend less time on employment relations but they do have a wider field of experience than their counterparts in larger firms. Based on the 2004 Workplace Employment Relations Survey (WERS 2004), managers of small firms are less positive about unions and is the reason why union membership among the workers in small firms is low (Forth, Bewley & Bryson, 2006). They prefer to consult directly with workers rather than through the unions as they do not view trade unions in favorable light. The small firms are unwilling to share control with trade unions but this is because they may not be aware of the potential benefits. However, trust between managers and employees, is high in small firms while absenteeism and voluntary resignations were low. Disputes of collective nature are rare in small firms which reflect the lack of collective labour organization. They however, have their own procedures for resolving industrial disputes. As firms grow in size, there is tendency to introduce formal practices to ensure rational and consistent behaviour. 5. Formal HR practices Decline in trade unionism has led to an increase in HR practices and new forms of work organization such as high-involvement, high commitment, and high performance management (Machin & Wood, 2005). High commitment management has been found to be equally in practice both at unionized and non-unionized workplaces in Britain. Direct communication between management and the workers is also unrelated to unionized or non-unionized workplaces. These suggest that formal HR practices do not necessarily mean that the workplace should be free of unions. Union members, in fact, accept a role in enhancing economic performance. The unionized workplaces should also have HR practices in place as it results in positive attitudes. While direct communication and HR practices may reduce the willingness of workers to join unions, functional flexibility may be reduced which result in increased work loads for the workers, more power for the supervisor and erosion of union’s power base. Thus, a combination of union representation and HR practices is considered ideal for better commitment and participation. Collective bargaining and voice roles cannot replace the function of the unions. Differences exist in HR practices between family and non-family firms. Even within the same firm, the HR practices for compensation and reviews may be used for the non-family workers and not for the family members (Reid & Adams, 2001). Firm’s revenue is directly related to the employment of HR practices in a firm. As companies, grow the structures required to support them, have to become more formalized and complex. It is essential for family firms to professionalize their HR procedures. The HR practices for family members in a family business should not differ from the non-family counterparts. Family firms have to separate the ownership and management roles and should be able to integrate the HR practices into running the business to attain sustain competitive advantage. Family-owned businesses are likely to take a different approach to employee involvement practices. Those with paternalistic culture do not give importance to EI as they believe that EI is not essential and nor is trade union representation essential (Harris, Reid & McAdam, 2004). In fact EI may even be perceived as a threat. They do not even encourage direct communication and they are less innovative and less flexible workplaces than non-family owned workplaces. 6. Conclusion & Recommendations 6.1 Conclusion The benefits of having a recognized trade union are immense. The working scenario has undergone tremendous changes since the 1970s when unions had a negative impact. Unions represent their members but the firms too derive benefits. The small firms have been keeping away from unionization possibly due to lack of appropriate information or due to fear of loss of control. As the firms grow in size – in terms of workers and revenue, the owner/managers need to focus on other issues and find it difficult to take care of HRM practices. The small firms can no more afford to have a paternalistic attitude and still compete in the global market place. They need to become innovative. While some firms claim to be practicing new management initiatives, the benefits are yet to be realized. Managers in small firms do not have the qualifications for HR issues and stand to gain through recognized unions. At non-union firms the workers’ benefits remain unattended to and the workers are expected to deliver work without raising any issues regarding pay or leave benefits. This results in lack of employee commitment thereby affecting the firm performance. 6.2 Recommendations The firm that has recently expanded has experienced lot of changes in recent years. To sustain growth and to remain competitive, the firm should consider the benefits of having a recognized union at the workplace. To understand the benefits, the government has useful information available. The firm should recognize that it stands to gain in several ways. The owners can keep away from mundane HR issues and focus on the core functions of the organization. They cannot expect to continue working in a ‘friendly and flexible’ manner but have to initiate strategic HR practices. These, have to be combined with unionization to attain employee involvement. Employees, in paternalistic environments, may not express their grievances because there is no platform available to them. Nevertheless, they carry the grievances and this affects the productivity as there is no involvement in the job or the company. Partnering with trade unions can enhance the employee commitment as their voice can be heard. The current practices in small firms concerning pay, leave, transfers and work flexibility are mere claims with no professional experience. The managers at the small firms severely lack the expertise and knowledge to handle such issues. The trade unions bring with them experience, knowledge and different perspectives which can help the small firms in solving several problems. Thus trade unions can bring benefits both to their members and the organization concerned. References Acas, 2005, 'The Acas model workplace', retrieved online 28 November 2009 from http://www.acas.org.uk/media/pdf/g/e/Model_Workplace.pdf Addison, JT & Belfield, CR 2001, 'Updating the determinants of firm performance: estimation using the 1998 UK Workplace Employee Relations Survey', British Journal of Industrial Relations, vol. 39, no. 3, pp. 341-366 Bacon, N Ackers, P Storey, J & Coates, D 1996, 'It's a small world: managing human resources in small businesses', The International Journal of Human Resource Management, vol. 7, no. 1, pp. 82-101 Bacon, N & Hoque, K 2005, 'HRM in the SME sector: valuable employees and coercive networks', Int. J. of Human Resource Management, vol. 16, no. 11, pp. 1976-1999 BIS, n.d., 'Work effectively with trade unions', retrieved online 28 November 2009 from http://www.businesslink.gov.uk/bdotg/action/detail?r.s=sl&r.lc=en&type=RESOURCES&itemId=1073792416 BISa, n.d., 'Work effectively with trade unions', retrieved online 28 November 2009 from http://www.businesslink.gov.uk/bdotg/action/detail?r.s=m&r.l1=1073858787&r.lc=en&r.l3=1074020279&r.l2=1074436102&r.i=1073792416&type=RESOURCES&itemId=1073792417&r.t=RESOURCES Chiu, RK 1999, 'Employee involvement in a total quality management programme: problems in Chinese firms in Hong Kong', Managerial Auditing Journal, vol. 14, no. 1/2, 8-11 Dundon, T Gruglis, I & Wilkinson, A 1999, '"Looking out of the black-hole" Non-union relations in an SME', Bradford: 1999. 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