International HRM and Industrial Relations

Submitted by
Arvind Kumar Topno (14HS60002)

Introduction
Industrial relations in countries, sub-regions and regions, have been influenced by a variety of
circumstances and actors such as political philosophies, economic imperatives, the role of the
State in determining the direction of economic and social development, the influence of unions
and the business community, as well as the legacies of colonial governments.
While the issues associated with the management of international human resources have received
significant attention in the literature, industrial relations (IR) issues have not received the same
degree of attention. One of the main reasons for that is -- Globalization has led employers to
push for less regulation of IR, less standardization of the employment relationship, and a greater
focus on the workplace as the centre of gravity of IR. Employers as well as some governments
are viewing IR from a more strategic perspective, i.e., how IR can contribute to and promote
workplace cooperation, flexibility, productivity and competitiveness. It is increasingly
recognized that how people are managed impacts on an enterprise's productivity and on the
quality of goods and services, labour costs, the quality of the workforce and its motivation.
The international HRM of MNCs is subject to dual pressures. On the one hand, there are
pressures for internal consistency. This applies particularly for ethnocentric and geocentric
MNCs which aim to have similar employment practices world-wide. On the other hand, foreign
subsidiaries of MNCs face pressures for adaptation from local institutions.
The focus of this study is on delineating the IR systems of various countries or regions with a
particular focus on variations between countries or regions in terms of levels of trade union
density, industrial conflict, industrial relations institutions and the like. The focus of comparative
studies is on the phenomena outside the workplace which determine and regulate the nature of
employment relations in specific nation states or even within regions (for example within the
European Union). For example the emphasis on industry level bargaining and employee
participation in the workplace via works councils which characterize the German IR system vis-vis the concept of employment-at-will and antipathy toward trade unions which underscore the
US system. Issues which involve wages, employee participation, training and dismissal cannot
be dealt with without taking into account a variety of collective agreement provisions set forth by
the government. At the national level, then, there is an inextricable link between the nature and
form of human resource management as practiced in companies, and the culture and structure of
industrial relations in the country concerned.
Need for Research
In todays global world Multinational corporations and organizations are functioning in several
countries. It is very essential to understand the rules, regulations, procedures, laws, local and

national policies and social and cultural orientation of any country towards industrial relations
aspects and approaches to handle and solve the industrial relations disputes. It helps to smoothen
the functioning of MNC as well as create an atmosphere of trust, harmony and industrial peace
which is very essential for not only the growth and prosperity of any company but also for the
development of economies.
Objective
To study the Industrial Relations in international HRM context and compare the labour relations
of various countries. It will help the MNEs to understand and deal with local country specific
industrial relations issues and disputes.
Research Methodology
The research method consists of literature review and secondary data and information. The
method of research includes comparison of various labour laws, IR practices and methods to
resolve and handle disputes and union activities. The major source of secondary data is through
research journals, ILO research papers and respective countrys labour laws.
Limitations of the study
The main limitation of this study is that this paper did not use the primary source of data
collection and it is purely based on secondary research data. Despite these limitations, this report
has summarized some key aspects and integrated models of industrial relations. Its findings can
be helpful for designing human resource management and industrial relations for international
personnel of multinational and international entities.
Review of existing literature
There has been various literature survey on international human resource management and
industrial relations by De Nijs ( 1989), Schregle ( 1981), Poole (1986), Prahalad and Doz(1987),
Drucker(1989), Peter and Water (1982), Noda (1989), Vogel (1987), Brewsler (1989), and
Abegglen (1984). According to De Niji (1989), A human resource manager of a multinational
and national organization must establish a standard labor-management relation system in order
to encourage higher workers productivity and faster rate of economic growth of the organization
as well as the country. Schregle (1981) has observed that industrial relations phenomena are a
very faithful expression of the society in which they operate, of its characteristics/ features and of
the power relationships between different interest groups. He also explained that industrial
relations cannot be understood without an understanding of the way in which rules are
established and implemented and decisions are made in the society concerned. Poole (1986) has
identified several factors that may underline these differences:
The mode of technology and industrial organization at critical stages of union development.
Methods of union regulation by government.
Ideological divisions within the trade union movement.
The influence of political parties on trade union development.

 Managerial Strategies for labor relations in large corporations.

Prahalad and Doz (1987) notes that the lack of familiarity of multinational HR and IR managers
with local industrial relations system and political conditions has sometimes needlessly worsened
a conflict that a local firm would have been likely to resolve. Increasingly, multinationals must
identify and analyze various shortcoming and admitting good industrial relation policies which
will be flexible enough to adapt to local requirements. Drucker (1989) said that Japanese firms
encourage productivity through the development, involvement and recognition of its employee.
Vogel (1987) has explained Japanese managers and employees have such strong belief that they
cannot run industry if they always indulge in conflicting mode with each other and consider
other party as enemy. They not only consider but treat each other as equal partner in running the
business for overall industrial peace, progress and harmony. Mead (1996) observed that Japanese
managers see employees as a valuable asset that provides their firms with sustainable
competitive advantage. Japanese managers treat workers as a dignified human beings and partner
in the business processes. If workers are treated as equal partners and as dignified human beings,
they will, as a rule, contribute to their highest potential for the overall achievement of
organizational objectives and they will be lesser instances of industrial conflict. Japans has
achieved remarkable level of productivity and technological advancement post world war
destruction the whole credit most of the researchers and management experts. Noda (1989),
Brewster (1989), and Abegglen, 1984) give to its unique style of management that emphasizes
sound labor-management relations, co-operation, attitude of employees and very effective
industrial relations practices in place. The successful companies of USA, Germany and other
European countries also hold this belief-treating people as asset because it is the companys
human resource which is responsible for success and progress of any organization. Successful
companies of USA, as opined by Peter and Waterman (1982), also put top emphasis on the
philosophy of achieving high level of productivity through people. Experts and researchers
characterize Japanese system of labor-management relations as harmonious and collaborative.
Japan has the lowest incidents of labor unrest and industrial conflicts among the industrially
developed nations and the number of man-days lost due to strikes and lockouts is only one eighth
than in the United States (Noda, 1989).
Finally, before examining the key issues in labor relations as they relate to multinational firms, we should
look upon some general points about the field of international labor relations for better understanding and
clarity. These are as follows:

a) First, it is important to realize that it is not only very difficult but also very complex to
compare industrial relations systems and behaviors across national boundaries; every country has
different set of ideologies, political and legal systems, financial and economic orientations and
objectives, culture, religion, demographics etc. these factors play a very important role in
shaping the industrial relation systems of any country a labor relations concept may change
considerably when translated from one industrial relations context to another. The concept of
collective bargaining, for example, in the United States is consider as a means to negotiate
between a labor union local and management; on the other hand in case of Sweden and Germany
the term collective bargaining means to have negotiations between an employers organization
and a trade union at the industry level. Cross-national differences also can be easily visible as to
the objectives of the collective bargaining process and the enforceability of collective
agreements. Many European trade unions of former USSR countries considers the collective

bargaining process as an ongoing class struggle between labor and capital which is the ideology
of Marxist industrial relations orientation, whereas in the United States trade unions tend towards
a pragmatic economic view of collective bargaining rather than an ideological view.
b) Second, it is generally recognized in the international labor relations field that no industrial
relations system can be understood without an appreciation of its historical origin, political
orientation, culture demography, technology financial and economic orientation.
Industrial relations systems and developments play an important role in determining economic,
social, cultural and technological outcomes and are thus a key area of comparison. More broadly,
it is widely considered that there is a distinctive 'European social model', which is clearly
observed as differing significantly from the models of governing society, the economy and the
labour market found in the USA, Japan and elsewhere. Definitions of what exactly constitutes
the European social model differ, but it certainly includes the institutions and processes of
industrial relations. International comparison of industrial relation systems in this area can thus
help to make clearer what the European social model is and how, and by how much, it differs
from the models which characterize other countries.
US approach to labour relations
Collective Bargaining: It is the process in which formal labor agreements are reached between
union and management representatives; it involves the negotiation of wages, hours, and
conditions of employment and the administration of the labor contract.
Union: An association of worker that represents the workers in collective bargaining
negotiation, it has the legal authority to negotiate with the employer and administer the labor
contract
Steps of grievance procedure

Efforts are made to resolve the conflicts at the lowest level of the hierarchy as quickly as
possible
First step usually involves a meeting between the representative of the worker (shop
steward) at the operating level and the employees supervisor they basically attempt to
agree on how to resolve the grievance
Unresolved issues and grievances may involve union officials and higher-level
management representatives these conciliatory approaches usually solve the grievance
Sometimes the matter ends up in the hands of a mediator or an arbitrator or both the
parties approach to labour courts to legally resolve the dispute.

Mediator: A person who brings and mediates between both sides (union and management
representatives) together and helps them to reach a settlement that is mutually acceptable
Arbitrator: An individual appointed by proper agreement by both union and employer who
provides a solution to a dispute that both sides (union and management representatives) have
been unable to resolve themselves and that both sides agree to accept.
Three of the most common arbitration approaches for resolving wage-related issues include:

50/50 split: Splitting the difference between the demands of the employer and
workers
Either/OR: Using an either-or approach: One position or important demands of the
parties are fully supported and the other less important ones are rejected
Whats Fair: To determine a fair wage based on economic conditions.

Importance of positive labour relations

They directly affects the labor costs, productivity, and ultimately, the profits
Labor costs in the US are observed lower in recent years than in most other major
industrial countries.
Thanks to unionmanagement cooperation and coordination, U.S. companies and
employers have been able to introduce high-technology and efficient machinery.
The outcome is a result of effective labor relations strategies between employer and
workers.
Labor Relations in other countries
Europe:
In European firms typically negotiation agreements takes place with unions at the
national level.
Worker unions in Europe have more political power than U.S. unions.
Employees in Europe (including those at managerial levels) often have their union
associations.
Worker unions in Europe have long history than those in the United States and it
occupies a more accepted position in society.

In developing and emerging economies such as China, India, and Southeast Asia
Workers and their unions are less powerful.
There are issues of multiple unions and union rivalry.
In India Trade Union believe in class conflict hence there are many incidents of strikes
and labour unrest
There is heavy political interference in Trade union and labour problems and most of the
unions are affiliated and associated with one or more political parties.
Workers are often compelled to accept conditions of employment set by management

UK
A labor agreement between worker and employer in UK is not a legally binding contract.
Violations of the agreement by the union or by management carries no legal actions or
penalties
Unions in UK are relatively powerful and strikes are more prevalent than in the United
States

Union membership in UK has declined in recent years

Labor agreements in UK do not usually include provisions for arbitration of
disagreements or grievances

Germany
Workers have rights and they are addressed more carefully by the management
The power of Union in Germany is very strong
Union membership is voluntarythere is generally one union in each major industry
Individual workers have rights to negotiate either individually or collectively with
management to secure wages and benefits that are superior to those spelled out in the
agreement even when covered by a labor contract

Japan
Social practices shapes non-confrontational unionmanagement behavior
Provisions in Japanese labor agreements are usually vague, but they are legally
enforceable
Disputes and other issues are settled in an amicable manner but sometimes resolved by
third-party mediators or arbitrators
There are labor commissions which have been established by law
Japanese unions are relatively weak than European unions
China
The Chinese economy has shifted from a command economy to a more market based
economy
An increasing emphasis is being placed on the importance of the collective contract
system
Integration of trade unions into workplace management continues to prevent collective
consultation from providing an adequate framework for the full rights and freedom and
regulations of labor relations
Labor problems in China has become a point of contention in international trade and
human rights discussions
Southeast Asia including Brunei, Cambodia, East Timor, Indonesia, Laos, Malaysia,
Myanmar (Burma), Philippines, Singapore, Thailand, and Vietnam
Many states are still keeping labor rights under check, whether in the name of economic
development, national unity, or social stability
Labor rights are fragmented or constrained due to the political environment
Labor policies in Southeast Asia have been influenced by market-based policies of
international competition

Industrial conflict around the world

US
Most of the U.S. labor relations have a specific provision that outlaws strikes; thus,
sudden or unauthorized strikes (commonly called wildcat strikes) are uncommon.
The grievance procedure is used to resolve the issues peacefully
Once the agreement period is over and if a new one is not successfully negotiated:
Workers may call a strike or continue to work without a contract while threatening to
walk out
Management also can resort to lock-outs but it is very rare

UK
Worker unions are relatively powerful (has decreased in recent years)
Strikes in UK are more prevalent than in the United States
Labor contracts typically do not prohibit strikes and the general public is more used to
and tolerant of them
System is not geared toward the efficient resolution of disputes
In UK generally it still appears willing to accept conflict with resulting strikes and
lockouts as the price of protecting the rights of the workers

Germany
Strikes and lockouts are prohibited in Germany during the period when a labor
negotiation agreement is in effect
A strike is legal when the agreement has run out and a new one has not yet been ratified
by the workers
German unions tend to be industry widea firm quite often has several agreements in
action with different termination dates
There tends to be a fair amount of cooperation and coordination between management
and worker unions because of the way labor relations are legally structured
Japan
Strikes and lockouts in Japan are very rare
Japanese workers sometime strike when a union is under negotiation with management
during industry wide strike to show support for their union
Cultural value of Wa implies that individuals should subordinate their interests and
identities to those of the group
There cultural values accounts for much of the harmony that exists between management
and labor in Japan.

Common forms of industrial democracy

The European Commission has stated that a primary objective is to obtain a minimum
threshold of social rights for workers, to be negotiated between a European union and
employers
Several systems of industrial democracy exist in European countries and elsewhere
One system may be more prevalent than others in some countries
It is common to find a number of these forms existing simultaneously
Codetermination: It involves the participation of workers on the level of board of
directors
The EU Council of Ministers recently issued a directive requiring all companies with 50
or more employees to inform and consult workers representatives about company
strategy by 2008
Work councils functions in all European countries firms.
Basic function of Work council is to improve company performance, efficiency, working
conditions, and job security.
Some councils are worker- or union-run others are chaired by management
representatives.
Workers are elected typically to serve on the council
Management representatives are appointed by the management of the company.
Some common forms of shop floor participation include:
Worker involvement programs
Quality circles
Other forms of participative management
QWL (quality of work life) programs are currently popular in manufacturing and
assembly plants
Most common forms of financial participation:
Profit sharing between workers and employer.
Productivity or gain-sharing workers and management share productivity gains
in a predetermined ratio
It has not been widely adopted in other countries
It has gained some prominences in a number of U.S. firms, especially those using gain
sharing as a team incentive for performance improvement.
Industrial democracy in selected countries
US
Collective bargaining is the most common type of industrial democracy guidelines
are enacted as per law.
NLRB certified unions are the exclusive bargaining agent for employees authorized to
represent workers in negotiation and administration of labormanagement relations

 Problem solving teams: Worker groups discuss ways to improve quality, efficiency, and
overall work environment
Special purpose teams: Worker groups that design and introduce work reforms and new
technology
Self-managing teams: Worker groups perform supervisory duties and manage
themselves, it consists of individuals who learn all the tasks of all group members and
team members rotate jobs.
UK
Industrial democracy in UK takes the form of collective bargaining and worker
representation through the use of unions
Worker groups in UK elect a chief spokesperson or steward to have their interface with
management
Union councils represent unionized employee to ensure workers are treated fairly and in
dignified manner by management. This may create a problem if the spokespersons or
stewards in the company disagree with the union councils
Germany
Industrial democracy and codetermination practices are very strong in Germany
Worker unions are charged with handling the collective bargaining with management
German law has established internal boards to ensure codeterminism in the workplace
Supervisory boards are similar to a board of directors in U.S. firms
Management boards are responsible for day to day operation
Employees in each plant elect a plant work council
Members of plant work councils in multi-plant companies also serve on a company
work council
Denmark
Danish workers participate in the management of their company affairs both directly and
indirectly
Direct form includes use of semiautonomous work groups that provide ideas on how to
enhance productivity and quality and how to schedule the work.
Indirect form includes use of shop stewards on the work floor, workers representation
on boards of directors, cooperation committees consisting of worker and management
representatives, safety groups made up of a supervisor and an elected employee
representative, and participation on safety committees that are headed by a manager.
Sweden
Industrial democracy in Sweden is directed very heavily toward ensuring quality of
work life (QWL) and worker participation in the operation of the daily activities

 Semiautonomous work teams and a cooperative spirit between employer and workers
are key elements of Swedish industrial democracy
Swedish firms have workers as members of their board of directors. Worker board
participants receive formal training and spend time with other workers on the board to
ensure they are competent enough to complete their tasks
China
Chinese enterprises traditionally had 2 policy-making committees

Communist Party leaders and members

Managers and worker representatives

The political climate determined which committee had more power
After reforms in the 1980s, the workers (not the party members) represented industrial
democracy in communist countries. The Chinese government has agreed to an
ambitious program of cooperation with the ILO which will provide advice on such
things as job creation, job satisfaction, workplace safety, collective bargaining, health,
safety, welfare and the settlement of labor disputes
Japan
Industrial democracy in Japan is not closely associated to political philosophy
Japanese firms are oriented more towards the operating philosophy of enhancing
worker performance
Management is receptive to workers ideas that will produce bottom-line results
Due to the basic nature of Japanese unionmanagement relations there is very little
industrial democracy in comparison with European firms.
Recommendations
In order to overcome the barriers to effective international regulations for making active
industrial relations to resolve disputes and establish industrial harmony between labour and
management, the recommendations are as follows:
As there are various differences in economic, political, legal, cultural, traditional related with
labour relations systems across countries management of industrial relations should be
delegated to subsidiaries.
Managers at local subsidiary should set up international human resource management
approaches according to the national laws and philosophy of each subsidiary
Managers must possess some prior experience and have proper understanding of national
industrial relation systems while dealing with labour issues because European system is
different from American system in case of labour relations.
Management attitude, ideology and philosophy towards worker and union must be aligned
with local industrial relations ideologies and system.
IHRM managers must possess the knowledge about international laws and regulations
developed by EC, ILO and OECD.

IHRM manager should analyze labour relation issues that are common in all the countries and
also conduct the practices in each of the countries in which MNC operates and develop a
standard policy.

Conclusion
The impact of globalization requires IR systems to adapt to ensure improved economic
competitiveness, flexibility and overall efficiency to respond to changing international market
circumstances for any Multinational enterprises. Employers and their organizations therefore
have the most important role in generating the responses needed to take advantage of these new
and emerging circumstances. Industrial relation issues are very sensitive and need to be handled
with proper care and caution as it involves not only compliance with laws and regulation of local
country but it also involves the sentiments, culture, tradition and customs of employees of any
particular country. Any MNC to succeed in any region or country must adapt to local tradition,
practices, customs and must respect the local industrial relation ideologies and orientation of the
worker because it is finally the human resource of the organization that will bring the overall
success to achieve goals and objective of any organization.

References
Collings G.David, Multinational corporations and industrial relations research: A road less
travelled IJMR,Vol.10,issue 2
Macdonald David, Industrial relations and globalization: Challenges for employers and their
organizations,ILO publications,May,1997
Muller Michael, Human resource and industrial relations practices of UK and US
multinationals in Germany, IJHRM,Aug,1998
Sriyan de Silva, The Changing Focus of Industrial Relations and Human Resource
Management, ILO publications, May, 1997
Sheikh Abdur Rahim,International Human Resource Management and Industrial Relations: A
Framework for Analysis, ASA University Review,Vol.5 No.2, Jul-Dec 2011
http://www.eurofound.europa.eu/observatories/eurwork/articles/industrial-relations-in-the-eujapan-and-usa-2002
http://universalteacher.com/1/key-issues-in-international-industrial-relations/