INTERNATIONAL INDUSTRIAL RELATIONS

Objectives of IR

Development & promotion of harmonious labour relations in labour & management Avoidance of conflicts by maintaining industrial peace & goodwill To safeguard interest of labour, management, industry, & national economy To boost the morale, discipline in workers To raise productivity levels

The Challenge to the Multinationals

Standardization vs. local adaptation Global mindset and local responsiveness

International IR Issues & Concerns

IR policy of MNCs Unions influence on International IR MNCs characteristics in neutralising the power of labour unions MNCs strategy towards International IR

1.IR policy of MNCs

Degree

of inter-subsidiary production integration Nationality of ownership of the subsidiary IHR management approach Subsidiary characteristics Characteristics of the home product market

2. Unions influence on International IR

Influencing wage levels Affecting the MNCs ability to vary employment levels at will Restricting MNCs discretion of social dumping

3. MNCs characteristics in neutralising the power of labour unions

Massive financial resources to absorb losses in a foreign subsidiary Options to shift production units to other countries Distance between HQ & Subsidiary

4. MNCs strategy towards International IR

Conflict or inflexible, uncompromising hostility Armed truce attitude Power bargaining Accommodation Cooperation Collusions

Difference in MNE Approached to International Industrial Relations

Degree of centralization or decentralization can be influenced by several factors:

Degree of inter-subsidiary production integration Nationality of ownership of the subsidiary IHR management approach MNE prior experience in industrial relations Subsidiary characteristics Characteristics of the home product market Management attitudes towards unions

Degree of Inter-subsidiary Production Integration and ILR

High degree of integration was found to be the most important factor leading to the centralization of the IR function within the firms studied. Industrial relations throughout a system become of direct importance to corporate headquarters when transnational sourcing patterns have been developed, that is, when a subsidiary in one country relies on another foreign subsidiary as a source of components or as a user of its output. In this context, a coordinated industrial relations policy is one of the key factors in a successful global production strategy.

Nationality of Ownership of the Subsidiary

US firms tend to exercise greater centralized control over labor relations than do British or other European firms. US firms tend to place greater emphasis on formal management controls and a close reporting system (particularly within the area of financial control) to ensure that planning targets are met. Foreign-owned multinationals in Britain prefer single-employer bargaining (rather than involving an employer association), and are more likely than British firms to assert managerial prerogative on matters of labor utilization. US-owned subsidiaries are much more centralized in labor relations decision making than the British-owned, attributed to:

More integrated nature of US firms Greater divergence between British and US labor relations systems than between British and other European systems, and More ethnocentric managerial style of US firms

IHRM Approach

An ethnocentric predisposition is more likely to be associated with various forms of industrial relations conflict. Conversely, more geocentric firms will bear more influence on host-country industrial relations systems, owing to their greater propensity to participate in local events.

Prior Experience in Industrial Relations

European firms tend to deal with industrial unions at industry level (frequently via employer associations) rather than at the firm level. The opposite is more typical for U.S. firms In the U.S., employer associations have not played a key role in the industrial relations system, and firm-based industrial relations policies are the norm.

Subsidiary Characteristics

Subsidiaries formed through acquisition of wellestablished indigenous firms tend to be given much more autonomy over industrial relations than are green-field sites. Greater intervention would be expected when the subsidiary is of key strategic importance to the firm and when the subsidiary is young. Where the parent firm is a significant source of operating or investment funds for the subsidiary a subsidiary is more dependent on headquarters for resources there will tend to be increased corporate involvement in industrial relations and human resource management. Poor subsidiary performance tends to be accompanied by increased corporate involvement in industrial relations.

Characteristics of the Home Product Market

Lack of a large home market is a strong incentive to adapt to host-country institutions and norms.

If domestic sales are large relative to overseas operations (as is the case with many US firms), it is more likely that overseas operations will be regarded as an extension of domestic operations. For European firms, international operations are more like to represent the major part of their business. Since the implementation of the Single European Market, there has been growth in large European-scale companies (formed via acquisition or joint ventures) that centralize management organization and strategic decision-making. However, processes of operational decentralization with regard to industrial relations are also evident.

Management Attitudes towards Unions

Knowledge of management attitudes or ideology concerning unions provides a more complete explanation of multinational industrial relations behavior than relying solely on a rational economic model.

Competitive/confrontational versus cooperative Codetermination Works council Sweden has the highest level of union membership U.S. managers tend to hold a union avoidance value France has the lowest unionization in the western world.

Union density in western industrial societies

Key Issues in International Industrial Relations

National differences in economic, political and legal systems produce markedly different IR systems across countries Multinationals generally delegate the management of IR to their foreign subsidiaries. However, a policy of decentralization should not keep corporate headquarters from exercising some coordination over IR strategy. Generally, corporate headquarters will become involved in or oversee labor agreements made by foreign subsidiaries because these agreements may affect the international plans of the firm and/or create precedents for negotiations in other countries.

Labor Relations in the U.S.

National Labor Relations Act (1935), also known as the Wagner Act Labor-Management Relations Act (1947), also called the Taft-Harley Act An organizational behavioral approach: voluntary and informal, initiated by management, e.g.

Participative management Employee empowerment Advocating market forces, efficiency, and effectiveness Collective bargaining at the firm level More adversarial labor relations

German Industrial Democracy

A formal-structural approach aimed at equalizing power

Established since post WWII The Codetermination Act (1951) The Codetermination Law (1976)

Supervisory Board Management Board Works council

Union Structures

Differ considerably among countries IR policies must be flexible enough in order to adapt to local traditions and institutional requirements.

Industrial unions Represent all grades of employees in an industry; Craft unions Based on skilled occupational groupings across industries; Conglomerate unions Represent members in more than one industry; General unions Open to almost all employees in a given country. Enterprise union - a single trade union within one plant or multi-plant enterprise, rather than within a craft or industry, common in Asia-Pacific countries.

Trade Union Structures in Leading Western Industrial Societies

Australia
Belgium Canada Denmark

General, craft, industrial, white-collar

Industrial, professional, religious, public sector Industrial, craft, conglomerate General, craft, white-collar

Finland
Great Britain Japan Norway Sweden Switzerland

General, white-collar, professional and technical enterprise

General, craft, industrial, white-collar, public sector Enterprise Industrial, craft Industrial, craft, white-collar and professional Industrial, craft, religious, white-collar

The Netherlands Religious, conglomerate, white-collar

US
West Germany

Industrial, craft, white-collar, public

Industrial, white-collar

Trade Unions and International Industrial Relations

Trade

unions may limit the strategic choices of multinationals in three ways:

By influencing wage levels to the extent that cost structures may become uncompetitive; By constraining the ability of multinationals to vary employment levels at will; and By hindering or preventing global integration of the operations of multinationals.

Trade Unions Response to Multinational

Seeing the growth of multinationals as a threat to the bargaining power of labor because of the considerable power and influence of large multinational firms. Multinationals are not uniformly anti-union, but their potential lobbying power and flexibility across national borders creates difficulties for employees and trade unions to develop countervailing power. There are several ways in which multinationals have an impact upon trade union and employee interests.

The Response of Trade Unions to Multinationals

The response of labor unions to multinationals has been threefold:

Form international trade secretariats (ITSs) Lobby for restrictive national legislation, and Try to achieve regulation of multinationals by international organizations.
There are 15 ITSs, which function as loose confederations to provide worldwide links for the national unions in a particular trade or industry (e.g. metals, transport and chemicals). The secretariats have mainly operated to facilitate the exchange of information.

International trade secretariats (ITSs).

15 TUs - links with National unions in a particular trade Function to achieve transactional bargaining with each of the MNCs in its industry To lobby on political level for restrictive national legislation To attempt regulations of MNCs by international organisations (ILO,EU) through voluntary codes ICFTC, WCL promote solidarity between different countries & concerns with TU recognition training & education to affiliated unions negotiations

Strategies of Trade Unions

Company councils International TU build networks to bargain Collection & exchange of information health standards, shifts in production schemes 1970s costly MNCs not recognising it Transnational bargaining identify the mutual interests of diverse labour markets diversity of international business forms

International labour standards link workers right with trade Industrial Solidarity

Solidarity messages voicing support for action in the corporation Ad-hoc assistance legal, financial support Corporate campaigning union recognition, renewal of agreement SUNLIGHT STRATEGY Pressure HQ to solve the dispute in the subsidiary solve it or get widespread attention

7 Characteristics of MNEs as the Source of Trade Union Concern

Formidable financial resources Alternative sources of supply The ability to move production facilities to other countries A remote locus of authority Production facilities in many industries Superior knowledge and expertise in industrial relations The capacity to stage an investment strike Refuse to invest any additional funds in a plant, thus ensuring that the plant will become obsolete and economically non-competitive Offshoring

Sources of Expat Failure

Spouse/familys inability to adjust to cultural/physical environment Expat's inability to adjust to cultural environment Other family related problems Lacks skills necessary to conduct business in host country culture

Personality or emotional maturity

Inability to integrate job expertise with larger responsibilities of assignment Inability to adapt to changing business priorities or organizational realignment Lack of technical competence
0% 10% 20% 30% 40% 50% 60% 70%

3 determinants of expatriate family adjustment (Alietal, 2003)

1.

2.
3.

Personality traits Family characteristics Work-life

Personality Traits
Cultural Empathy Open-mindedness Social Imitative Flexibility Emotional Stability

Family Characteristics
Family Cohesion Family Adaptability Family Communication

Work-Life
Expatriate work satisfaction Support from the international company Other social supports

Theory of Expatriate and Spousal Adjustment (adaptation of Caligiuri model)

Personality Traits - Cultural Empathy - Open-mindedness - Social Initiative - Flexibility - Emotional Stability Family Characteristics - Family Cohesion - Family Adaptability - Family Communication Work-Life - Expatriate Work Satisfaction - Support from the international company - Other Social Support Networks

Intercultural Adjustment - Psychological Adjustment - Socio-cultural Adjustment - Work - Family - Culture

Traditional EAPs inadequate to serve expatriate populations

Most EAPs are U.S. centric and do not fully account for local and cultural needs. Expatriates & families tend not to use traditional EAPs. Many EAPs are passive. Delivering consistent EAP services globally has proven complicated. Traditional EAP alone is not sufficient to meet the complex needs at each stage of an expatriate assignment assignment.

4 key elements in Expatriate EAP

1.

2.

3. 4.

Proactive Outreach (by phone and e-mail) to all new & existing expats and spouses to lend support and identify any issues Intervention (face-to-face or phone) with "incountry" professional coach or counselor (up to six visits) Educational Support facilitated teleconferences, webinars, and web site Pre-Departure Meeting Meet with new expats and spouses prior to departure to prevent or anticipate problems

Expatriate Employee Assistance Program (EAP)

The EAP is. . .

Confidential Proactive and strategic Free of charge to the expatriate families Ultimately voluntary

Spouse - isolated and afraid to leave the house in Mexico Child - not fitting in at school in the U.K. Expat employee - extramarital affair in China Expat employee - drinking excessively in Brazil

NON-EXPATRIATES
People who travel internationally yet they dont relocate themselves International business travellers Road warriors, Globe trotters, Frequent fliers Perform international assignment as normal duties Stress

Stressors - Defrank et al
Home & Family issues Work arrangements Travel Logistics Health Concerns Host cultural issues

Advantages
Enjoy the excitement & thrills in foreign locations Agents of Socialisation, network builders, boundary spanners, language nodes