Introduction

The term “industrial relations” has developed both a broad and a narrow meaning. Originally,
industrial relations were broadly defined to include the totality of relationships and interactions
between employers and employees. From this perspective, industrial relations cover all aspects
of the employment relationship, including human resource (or personnel) management,
employee relations, and union-management (or labor) relations.

Interaction between employers, employees, and the government, and the institutions and
associations through which such interactions are mediated. Government has a direct involvement
in industrial relations, through its role as an employer; one that is particularly prominent in states
where there are high levels of nationalization.

The term “industrial relations” came into prominent usage in the 1910s, its roots extend back at
least three decades into the nineteenth century. It was during this period, beginning in the 1870s
that the process of industrialization began in earnest in the United States, and leading to the
emergence of a growing urban-based wage-earning labour force working in large-scale factories,
mills, and mines. Conditions growing out of the industrialization process—twelve-hour work
days, tens of thousands of work-related fatalities, low wages, extremely high rates of labor
turnover, and poor employee work effort and attitudes—led to growing numbers of strikes,
revolutionary economic and political movements, and demands for social and economic reform.

During the prosperous and politically conservative 1920s, the American labor movement
suffered a significant loss in membership, influence, and public approval, while restrictive court
rulings and conservative political opposition hobbled the extension of labor legislation. In this
period the major line of advance in industrial relations was the employer’s solution of personnel
management. Numerous firms established personnel departments and in various ways tried to
reduce the most serious causes of labour unrest and turnover.

Thus the term “industrial relations” is increasingly associated with the unionized sector of the
labor market. But a minority of participants continues to view industrial relations as pertaining to
the entire world of work and, in particular, the three solutions to labour problems.

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Scope of Industrial Relation:
The scope of IR can easily been delineated as follows:

1. Labour relations, i.e., relations between labour union and management.

2. Employer-employee relations i.e. relations between management and employees.

3. The role of various parties’ viz., employers, employees, and state in maintaining industrial
relations.

4. The mechanism of handling conflicts between employers and employees, in case conflicts
arise.

The main aspects of industrial relations can be identified as follows:

1. Promotion and development of healthy labour management relations.

2. Maintenance of industrial peace and avoidance of industrial strife.

3. Development and growth of industrial democracy.

Importance of Industrial Relation for Employees and Employers

Industrial relations usually imply good and positive relations between the employees and
employers. The good IR help run an industry effectively and successfully, i.e., the desideratum
of the day. The importance of IR can be imbued with multiplicity of justifications.

To mention, good IR help:

1. Foster Industrial Peace:

Under the mechanism of IR, both employees and managers discuss the matter and consult each
other before initiating any actions. Doubts, if any, in the minds of either party are removed.
Thus, unilateral actions that prop confusion and misunderstanding disappear from the scene. In
this way, IR helps create a peaceful environment in the organisation. Peace, in turn, breeds
prosperity.

2. Promote Industrial Democracy:

Industrial democracy means the government mandated worker participation at various levels of
the organisation with regard to decisions that affect workers. It is mainly the joint consultations
that pave the way for industrial democracy and cement relationship between workers and
management. This benefits the both. The motivated workers give their best and maximum to the

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organisation, on the one hand, and share their share of the fruits of organisational progress jointly
with management, on the other.

3. Benefit to Workers:

IR benefits workers in several ways. For example, it protects workers against unethical practices
on the part of management to exploit workers by putting them under inhuman working
conditions and niggardly wages. It also provides a procedure to resolve workers’ grievances
relating to work.

4. Benefit to Management:

IR protects the rights of managers too. As and when workers create the problem of indiscipline,
IR provides mangers with a system to handle with employee indiscipline in the organisation.

5. Improve Productivity:

Experiences indicate that good industrial relations serve as the key for increased productivity in
industrial organisations. Eicher Tractors, Alwar represents one such case. In this plant,
productivity went up from 32 per cent to 38 per cent between 1994 and 1997. This increase is
attributed to the peaceful IR in the plant.

Why link industrial relations with productivity?

Of all the types of productivity, labour productivity has gained importance for the following
reasons:

1. Labour is a human factor that interacts with, reacts with and controls the productivity of other
factors. Labour is not a commodity.

2. It is one of the important factors of production and is universally used in all production and
distribution processes.

3. It is a relatively simple concept of the ratio of output to the input of labour.

4. Labour time utilized in the production process is quantifiable and measurable.

5. Every other factor of production can be converted into its labour equivalent (past and present
labour).

6. The labour productivity index is composite, for in the final analysis it reflects the realisation of
many other economic objectives, such as reduction in the cost of production, advantageous

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location of the industry, degree of specialization, effectiveness of capital investment, use of basic
funds, etc.

7. Unit labour requirements, expressed in terms of work-hours needed to produce a defined good,
can be directly added or subtracted.

8. Inter-firm comparisons of productivity changes over a period of time are possible.

9. Labour embodied in man has a dual role - as the purpose of production as well as a means of
production, i.e. a worker is both a producer and a consumer.

10. Labour productivity can be a helpful device in linking wages with productivity which in turn
promotes good industrial relations.

Productivity improvement Concept

Productivity improvement through employees and the unions is not a simple task, since unions
and their members are not a resource under the complete control of managements. Managements
must strive to build an industrial relations climate to motivate unions and union members to
cooperate and collaborate with them and to make them understand that both labour and
management have common interests and objectives that can be realized only if they work
together and continuously enlarge the cake to be shared.

Hence, productivity improvement puts the emphasis on educating the employees and creating
productivity awareness and consciousness among them, on involving and consulting the union in
developing norms of work and behaviour, on creating opportunities for employee participation in
decision-making processes, on negotiating productivity improvements and sharing the gains of
productivity, and on understanding together the policies of the State that affect the productivity
and profitability of the organization. The management also has a responsibility to develop a
technically qualified workforce, train, retrain and improve their potential, make them responsive
to the needs of the organization and extend their cooperation and support to productivity
improvement. Productivity improvement through industrial relations and employee participation
also calls for the presence of a union that is strong, stable, representative and democratic, and
responsive to the employees' and management's needs.

Productivity improvement through industrial relations calls for a different form of industrial
relations, in which the usual conflict-oriented adversarial kind is replaced by cooperation and
collaboration. The objective of such relations is not merely the maintenance of working
relationships but the achievement of cost-effective productivity on a continuing basis. For this
purpose management and unions need to create a permanent structure for ensuring cooperative
and collaborative relations - a structure wherein both sides work together towards a common
goal. Such a structure could be a joint negotiating committee or a joint labour-management
consultation system.

It is the responsibility of both management and unions to develop industrial relations that
facilitate productivity improvement. In this process new patterns of collective bargaining, such as
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integrative bargaining, productivity bargaining, concession bargaining and sectionalized
bargaining, may be adopted and put into practice by organizations at different times. Collective
bargaining becomes a truly bipartite joint decision-making process where productivity-linked
issues are negotiated and settled.

The two sides also need to have an effective tailor-made forum for employee participation in
order to achieve productivity improvement and identify the issues for discussion in the forum.

The involvement of the unions in productivity improvement is as vital as productivity

improvement itself. Hence, an understanding of the changing nature of trade unions, the issues in
which unions are interested, their demands and their responses to management demands is a
basic requirement. It is also vital that the management consciously endeavours to help to develop
committed trade unions at the enterprise level by recognizing and accepting their institutional
role. This will involve regular information sharing and consultation on productivity-related
issues and other common concerns, and also the cooperation of the union in educating and
training the workers.

The concept of tripartism in productivity improvement also requires that the State, especially in
the Third World countries, should play an important role in productivity improvement. It is the
State that lays down the policy and legal framework within which union(s) and management
have to work. The productivity of enterprises is also affected by state policies on economic,
fiscal, trade and industrial matters. Hence, it is necessary to understand the parameters of these
policies, which influence industrial relations, employment and non-employment, employee
training, working conditions, wages and social security, and the legislative measures that might
affect the productivity of organizations.

Keeping in view these dimensions of industrial relations that have a bearing on productivity
improvement, we shall now discuss these issues in detail.

Employment and Productivity

In the previous sub-section we noted the theory that an industrial relations factor, namely the
Accord, was a cause of the fall in productivity (relative to trend) that characterized the later
1980s. The suggested connection was the rise in employment attributed to wage restraint.

It has been argued more generally that when interpreting the productivity series, employment
behavior should be taken into account. (See, for example, Parham and Roberts 2004 and Perry
2006.) There are two reasons why there might be an inverse short-term relation between the
levels of productivity and employment. One is that an increase in employment decreases the ratio
of capital to labour. This will tend to reduce labour (but not necessarily multifactor) productivity.
The other reason is a likelihood that the average quality of the employed labour force varies with
the level of employment: high employment, with more abundant job opportunities, causes
employers to hire and retain less-preferred workers, who are also the people who lose their jobs
if the demand for labour falls.
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In a recent report, the OECD (2007) has related productivity growth in various countries to the
rates of increase of employment in those countries, and has found a negative correlation. That is,
more rapid employment growth is associated with lesser productivity growth. It can be seen that
the relation tested by the OECD is a variant of the above argument, which implies that a
movement from one level of employment to another will be associated (all else equal) with an
opposite movement in the level of productivity. Hence more rapid employment growth tends to
depress the rate of increase of productivity. In the OECD’s words, ‘a policy reform that
increased employment would have a less-than-proportionate impact on GDP per capita because
of its dampening effect on average measured labour productivity. The OECD’s explanations for
the negative correlation include the two mentioned above. It also suggests that a growth in the
labour supply will be associated with a relative expansion of labour-intensive, low productivity
industries.

It is also argued that there is an inverse relation between the rate of change of employment and
the level of productivity. The reasoning here is that employers have some reluctance to increase
or to reduce their workforces because of costs of hiring and firing. If there is a downturn in
business activity, they may ‘hoard’ labour in anticipation of recovery; and in an upturn, they tend
to delay the engagement of extra workers until they are satisfied of the ongoing need for it.
Hence productivity will be higher than otherwise while employment is growing and lower when
it is falling. This effect should be more pronounced with respect to the number of people
employed than for hours worked, but probably not to the exclusion of the latter.

Developing positive industrial relations

Important Objective of Good IR

First of all, of the most important objectives of good industrial relations, the most frequently
cited are:

 High or improved individual and group performance.

 Cost effectiveness.
 Productivity improvement.
 Improvement in the quality of life and work satisfaction. And
the development of human potential and its full realization.

Judge the Quality of Industrial Relations

To assess or judge the quality of industrial relations, some indices of good industrial relations are
suggested below:

 Harmonious industrial relations as a corporate objective and philosophy.

 Tripartite relations and a problem-solving approach (the third part - the State - is
represented through legislation).

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  Management’s recognition of the right of workers to freedom of association and to form a
strong, stable and democratic union.
 Transparency, openness and honesty in management policies and practices, information
sharing and effective communication.
 Uniformity and consistency in organizational policies, procedures and behavioural
norms.
 Integrated systems and policies.
 Positive and informal human resources management practices.
 Consultation by management of workers and unions in decision-making on all issues of
mutual concern and interest.
 To achieve industrial relations of this quality, it is necessary for organizations, their
management and their employees to have certain prerequisites. The most important of
these are:
 Professional management.
 An educated, self-disciplined and cooperative workforce.
 A responsible, responsive and representative but democratic union.
 Acceptance by management of unions, union officials and workers.
 Industrial relations goals that are shared by management and the union(s).
 Developed and mature collective bargaining relationships and procedures.
 Recognition by management and the union of the institutional roles of each other.
 Management's genuine interest in the employees and their problems.
 System of joint consultation and decision-making in areas affecting productivity and
relevant issues. and
 Bipartite committees and participative forums to develop and promote cooperative and
collaborative labour-management relations.

These prerequisites should be considered and analyzed in the country-specific context of the
technological, industrial, economic, business, socio-cultural, political and legal environment.

Some Analyses before deciding IR Action Taken

To identify the main bottleneck and barriers in industrial relations in any given company or
industry it is essential to undertake some analyses before deciding on the action to be taken:

 Analysis of the nature of trade unionism in a specific context.

 Analysis of collective bargaining relations in industry and the trends as regards the issues
arising and the settlements reached.
 Analysis of industrial conflicts resulting in work stoppages and lost workdays affecting
production.
 Analysis of the preferences and approaches of managements and unions in dispute
settlements. and
 Analysis of the legislative and other normative approaches of the State to the problems of
labour-management relations.

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Basic perceptions of and approaches to productivity

Productivity in the broad sense is a measure of how efficiently and effectively resources are used
as inputs to produce the outputs of products and services needed by society (bought by markets)
in the long term. Productivity improvement implies the elimination of waste in all its forms.
Total (not only labour) productivity improvement is thus one very effective strategy towards
ensuring sustainable economic and social development.

From the point of view of labour-management cooperation focused on productivity, it would be

very interesting to consider the most commonly found perceptions of different groups on the
subject:

Employers'/Management's perceptions: higher productivity to gain the competitive edge in the

product market; to expand business and maximize profits;

Workers' perceptions: higher workload, need to acquire new skills; suspicion about sharing the
gains of higher productivity; feeling of insecurity; an aversion to change in the methods and
techniques of work; job reduction or loss;

Unions' perceptions: exploitation of labour; loss of jobs, with fewer or no job opportunities for
the jobseekers; fear of union losing power and influence; and

Government's perceptions: economic and industrial growth; creation of wealth; greater

industrialization, creation of employment opportunities for the unemployed; overall economic
and social development of the country.

A discussion of these perceptions makes it clear that a well organized and intensive educational
and awareness-raising campaign is necessary in order to change the prevailing attitudes towards
productivity before taking the next action-oriented steps. And one aspect of this campaign would
be to secure the active cooperation of all the major players in productivity improvement. How
can they be involved? Below is a checklist of the most important roles played by workers and
employers and their organizations in productivity improvement in the most successful
companies.

Building a sound industrial relations legal framework

The first item in the ASEAN Guidelines on Good Industrial Relations Practices is the
development of a “favourable legal framework”. By definition, a legal framework as the body of
laws according recognition of the basic rights of the tripartite social partners in an industrial
democracy, those of workers and employers in particular. The legal framework defines the
conditions upon which those rights can be exercised, institutionalizes a system of enforcement
procedures and mechanisms, and provides for remedies when rights are violated or when
conflicts or misunderstandings develop. The ASEAN Guidelines, in exhorting countries to

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strengthen and develop their respective legal frameworks for industrial relations, also emphasize
that each framework should take into account national economic and social conditions. As
discussed in the Bogor seminar, there is no-one-size-fits-all model framework. For historical and
economic reasons, moreover, the level of development of such frameworks in the different
ASEAN countries will be naturally uneven. As pointed out in Section 1 (above) the transition
economies of Cambodia and Lao People’s Democratic Republic have adopted relatively new
labour laws. Meanwhile, some ASEAN countries have labour laws influenced by their colonial
experiences (e.g. the American influence in the Philippines, and Great Britain’s, in Malaysia). In
general, however, the Guidelines say that each framework must “guarantee and protect the basic
rights and requirements of employers to manage their business and to grow and that of the
workers to just working conditions, stable employment, minimum standards, a safe and healthy
working environment and to express their views as well as participate in decision-making that
have significant implications for themselves or their workplace”. The Guidelines also
recommend that labour laws should be “clear, reasonable, practical and effectively and evenly
implemented”.

The role of Employers' Organizations to Develop Productivity

 Disseminating information and knowledge about new technology, new methods of

production, market conditions, government policies and regulations, etc.;
 Acting as a liaison between the employers and the government in matters affecting the
interests of the member employers;
 Helping the member employers in negotiations with the unions about productivity
improvement; and
 Ensuring that member employers cooperate in matters of productivity and quality
management.

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The Role of Workers to Develop Productivity

 To acquire better knowledge and multi-trade skills and continuously upgrade them.
 To develop cooperative attitudes and team spirit.
 To be quality and cost conscious.
 To be innovative and resourceful in job- and employment-related matters.
 To be self-disciplined.
 To participate in decision-making processes.
 To respond to shop-floor problems and the concerns of fellow-employees.

The role of trade unions to Develop Productivity

To ensure internal democracy in the union and leadership among the employees.
To make reasonable demands and be willing to negotiate the management's demands.
To develop integrative and co-operative bargaining relationships with the management.
To help the management in identifying the areas for cost reduction.
To motivate employees to be quality and productivity conscious and help them to acquire
multi-trade skills and continually upgrade them.
To create, develop and adopt positive attitudes among the workers and union officials
toward modernization and rationalization for productivity improvement.
To develop jointly with the management the programmes of worker involvement in
productivity improvement and decision-making and to ensure employee participation at
all levels.
To recognize the rights and responsibilities of the management in the adjustment of
manpower (sectors, jobs, skills, positions, responsibility, attitudes, etc.) with a view to
productivity improvement.

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 To avoid work stoppages and other negative tactics that affect productivity until all other
means of settling disputes have been tried. and
To avoid introducing political issues into industrial relations.

The role of Government to Develop Productivity

 The industrial relations processes, and the relationships between employees and
employers, are influenced by the government and its agencies through the government’s
construction, passing and implementation of relevant industrial relations law, policies,
regulations etc.

 The legal framework within which Industrial Relations must function is determined by
the government and/or its agencies, possibly in consultation with other role-players in the
industrial relations processes; such as trade union representatives, employers and select
employees.

 The legal framework can be for example be the legal limitations imposed on an
employer/employee relationship – such as the amount of hours an employee is allowed to
legally work per week and how much an employer is obligated to pay an employee for a
certain amount of work.

 In South Africa, for example, the BCEA (Basic Conditions of Employment Act) can be
seen as a governmental contribution to the governing of the relationship between
employers and employees, and can as such be considered the government’s contribution
to guiding the processes of industrial relations.

Judge and jury:

The government can also become directly or indirectly involved in the industrial relations
processes when boundaries are overstepped or negotiations go awry. The government could
become involved in, for example, settling an industrial relations dispute in court, or adjusting
or amending a policy which has proven itself flawed, outdated or newly irrelevant following
the outcome of a certain case or set of negotiations.

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CONCLUSION
Absolutely everybody should know the who, what, when, where, and why of labour relations and
how industrial relations management works. Knowledge is power, and the above should have
adequately equipped you to identify and address breakdowns in communication and the
subsequent halt in production or lapse in productivity.

Whether you are an employee, an employer or a casual observer, it is important that you know
who to contact in the event of a breakdown in communication or unfair treatment in the
workplace. Open lines of communication are vital to ongoing economic and industrial growth;
we hope this guide to navigating the murky waters of industrial relations has taught you exactly
who you’ve got in your corner, and who to contact in a time of crisis.

Industrial relations exist to serve and protect everybody involved – from the employee, to the
owner, to the public at large and all the way through to the government. If the lines of
communication are open, and industrial relations are undertaken, everybody wins.

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