industrial relations

industrial relations
1. the dealings or relations of an industrial concern with its employees, with labor in general, with the public, etc.
2. the administration of such relations, esp. to maintain goodwill for an industrial concern.
[1900-05]

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Introduction
also called  organizational relations  

      the behaviour of workers in organizations in which they earn their living.

      Scholars of industrial relations attempt to explain variations in the conditions of work, the degree and nature of worker participation in decision making, the role of labour unions and other forms of worker representation, and the patterns of cooperation and conflict resolution that occur among workers and employers. These patterns of interaction are then related to the outputs of organizations. These outputs span the interests and goals of the parties to the employment relationship, ranging from employee job satisfaction and economic security to the efficiency of the organization and its impact on the community and society.

Worker, manager, and society

Conceptions of the worker
19th- and 20th-century views
      In classical economics, workers were regarded as commodities that were subject to the natural laws of supply and demand. Although classical economists readily acknowledged that workers are not motivated by money alone, their abstractions were based only on the economic aspects of reality. This led them to consider workers as undifferentiated and passive instruments in the production (production system) process.

      Karl Marx (Marx, Karl) in the mid-1800s challenged this view of labour. He rejected the notion that workers should bear the costs of market forces and went so far as to argue that all the value of production comes from workers' input; therefore, he insisted, labour should own the means of production. Since under a capitalist (capitalism) system the means of production are not owned and controlled by workers, the workers would be exploited. Eventually, suggested Marx and his followers, the injustice of this exploitation would lead to a revolutionary overthrow of the capitalist system and its replacement by a socialist (socialism) state.

      Later, around the turn of the century, British political economists Sidney and Beatrice Webb (Webb, Sidney and Beatrice) joined this debate by arguing that a combination of worker and community forces would gradually achieve a socialist (socialism) state. They shared with Marx a belief that workers and employers are separated by class (social class) interests and that only by organizing into trade unions (trade union) would workers amass the bargaining power needed to improve their economic and social conditions. They did not believe, however, that a revolutionary overthrow of the capitalist system was necessary for social progress. Instead, worker, employer, and community interests would eventually be harmonized through union representation, collective bargaining, and legislative protections.

      About the same time the Webbs were developing their views in Britain, an American view was taking shape under the work of John R. Commons (Commons, John R.) and his associates at the University of Wisconsin. Unlike classical economists, these institutional economists (institutional economics) believed that the laws of supply and demand could be influenced by the policies, values, structures, and processes used to govern employment relationships. Like Marx and the Webbs, Commons rejected the classical school's “commodity” view of labour and believed that an inherent conflict of interests separates workers and employers. He also believed, however, that these conflicts are a natural and legitimate part of any employment relationship and would not disappear if capitalism were replaced by socialism.

      Like Commons, many American scholars and social activists emphasized the importance of legislation designed to protect worker safety and health, to provide unemployment and workers' compensation insurance, and to guarantee minimum wages (minimum wage) and retirement benefits. Because they believed in the value of organized labour and in the need for negotiation and compromise between workers and employers, the institutional economists not only contributed to the development of modern industrial relations—they also provided many of the ideas behind the labour legislation enacted as part of President Franklin D. Roosevelt's (Roosevelt, Franklin D.) New Deal in the 1930s.

The advent of industrial relations in the United States
      The New Deal changed the face of modern industrial relations. In response to the economic and social crisis of the Great Depression, the U.S. Congress (Congress of the United States) and the Roosevelt (Roosevelt, Franklin D.) administration enacted a series of laws granting workers the right to organize into unions and to engage in collective bargaining with employers. Other New Deal legislation set minimum wages and provided a system of unemployment insurance and social security. In subsequent years unions organized large numbers of workers in the growing manufacturing, transportation, and communications industries. Labour organization reached a high point at the end of World War II, with unions representing nearly one-third of all American workers. By the beginning of the 21st century, however, membership in American unions had undergone significant decline.

      As the problems of labour–management relations came to the public's attention (largely through strikes (strike)), a number of American universities formed industrial relations research and teaching programs. The goal of these programs was to draw together the theories and insights of economists, labour and management specialists, and other social scientists to find ways to encourage greater cooperation and improved conflict resolution among workers and employers. Thus, the modern field of industrial relations was born.

Studies of worker behaviour

Scientific management
      While Marx, the Webbs, and Commons focused on the role of labour in the late 1800s and early 1900s, others were developing theories of management. Frederick W. Taylor's (Taylor, Frederick W.) engineering approach, later known as scientific management, was similar to that of the classical economists in regarding workers as passive instruments of production, but it did recognize differentiation among workers, at least insofar as degrees of skill were concerned. Taylor developed methods for time-and-motion studies (time-and-motion study) to identify the elements of particular jobs and to determine how elements should be arranged for the greatest efficiency. He limited his study to the individual worker, however; there was no place in his model for group membership or for the effects of groups upon individual behaviour.

      A step further in the recognition of differentiation among workers came with the emergence of industrial psychologists (industrial-organizational psychology), who are concerned with the measurement of the skills and aptitudes of individuals. At least in the early stages of these developments, workers were viewed as isolated individuals, and no attention was given to group phenomena.

      In the 1930s the emphasis of management researchers shifted from individuals to the work group. Of primary importance was the human relations research program carried out by Elton Mayo (Mayo, Elton) and his associates at the Hawthorne Western Electric (Western Electric Company Inc.) plant and their discovery of the “Hawthorne effect (Hawthorne research)”—an increase in worker productivity produced by the psychological stimulus of being singled out and made to feel important. The ideas that this team developed about the social dynamics of groups in the work setting had lasting influence. (See history of the organization of work (work, history of the organization of).)

      Behavioral scientists had made their entry into the field by attacking as oversimplified the tendency to view workers as autonomous labourers and to comprehend companies through notions, borrowed from engineering, that stressed organizational structure, technology, and efficiency. As often happens in arguments between members of competing schools of thought, some behavioral scientists went so far as to view the work organization exclusively as a system of social relations and to downplay the role of economic forces. During the l950s and '60s the field underwent a major process of redefinition that helped change previous conceptions of the worker.

      Behavioral scientists now recognize the importance of economic factors, but they see material rewards as having an effect upon behaviour in combination with social and psychological factors, and they study the pattern in this combination. Thus, over the years behavioral scientists have deepened the understanding of the ways that interpersonal, structural, and technological forces can affect organizations and industrial relations.

Conceptions of the manager
      Classical economists made no distinction between the manager and the entrepreneur, the person who brings together land, labour, and capital and puts them to work. This distinction did not take hold in the literature until the publication of The Modern Corporation and Private Property (1933) by Adolf Berle and Gardiner Means. When the authors demonstrated that in most American corporations the owners (that is, the stockholders) played no direct role in the management of the concern and that the managers generally had insignificant holdings of stock, it became apparent that theories of entrepreneurial behaviour contributed little to the understanding of managerial behaviour.

Specialized management
      At the onset of the 20th century, German sociologist Max Weber (Weber, Max) approached the study of managerial behaviour through his concept of bureaucracy. Weber used the term to highlight a phenomenon of growing importance to industrialized society: that of the large organization with a fixed hierarchical structure based on specialization and division of labour (labour, division of) and with established rules and regulations governing behaviour. To Weber, the manager was a person who interpreted and applied the rules of the organization.

      Later organizational sociologists, though recognizing the importance of Weber's emphasis on the impersonality and rationality of modern industrial and governmental organizations, pointed out flaws in Weber's model of the modern business organization. They argued that Weber's theory gave an unduly rigid picture of organizations, that it failed to devote attention to processes of change, and that it built so exclusively on the hierarchy of authority as to neglect relations not explicitly defined by the structure. In any case, Weber's formulations were of interest primarily to social scientists. Practicing managers and students in business schools at that time were likely to have little familiarity with the Weberian approach to managerial behaviour.

      The early model of the manager taught in American business schools emphasized functional specializations. In these terms the manager was the one who had mastered such subjects as accounting, marketing, production, finance, and so on. Later it was recognized by theoreticians and practicing managers alike that management was a good deal more than the sum of these specialized functions, and this realization in turn led to the conception of the manager as generalist—a person capable of comprehending the organization's various specialized functions and the people engaged in them. The emphasis turned to decision making, leadership, and the relation of the firm to its environment.

Participative management
      Some of the most innovative thinking on management education and practice was originated by management theorist Douglas McGregor in The Human Side of Enterprise (1960). In this book McGregor challenged many of the prevailing managerial assumptions about worker motivation and behaviour. According to the prevailing view, which he labeled “Theory X,” workers were seen as uninformed, lazy, and untrustworthy members of the organization. Management's task was to control workers and motivate them through a combination of control systems, fear of discipline or dismissal, and organizational rules. McGregor contrasted this with a “Theory Y” assumption, namely, that workers are highly motivated and can be trusted to contribute to the organization's objectives if given the opportunity to participate in organizational decision making. Out of the work of McGregor and others, such as Rensis Likert (Likert, Rensis), has evolved “participative management,” a process in which managers consult with and involve employees at all levels of the organization in organizational problem solving and decision making.

      McGregor's views were supplemented by theories that promoted innovations in the design and implementation of new technologies and production systems that would accommodate the physical and social needs of workers. These sociotechnical concepts originated in Europe and had substantial impacts on the design of innovative work systems in Scandinavia in the 1960s and '70s. By the early 1980s they had achieved significant acceptance and use in American firms.

      Sociotechnical theory and worker-participation models of decision making have become essential to companies as they face global competition and rapid technological change. Most contemporary organizational and industrial relations scholars have concluded that the full potential of new information and manufacturing technologies can only be realized through management processes that support participation and communication across functional lines and departments. This must be accompanied by effective problem solving and flexibility in how work is organized. Yet there is still considerable debate among practitioners over the feasibility, wisdom, and even the legal consequences of involving workers in organizational decision making. Therefore, vestiges of both Theory X and Theory Y can be found in the concepts and practices of contemporary organizations.

Responsibility to the worker
      The debate over the appropriate role for workers in organizational decision making is part of a larger debate over the extent of the firm's responsibilities to its community and society. This debate has been going on since the days of the Industrial Revolution.

      The Industrial Revolution brought about great accumulations of wealth and also focused public attention on the apparent negative effects of rapid industrialization on working people. To what extent workers in the new factories were worse off than they had been in the much smaller-scale cottage industries may be a matter of continuing debate, but there is no question that large concentrations of workers—men, women, and children—crowded together in factories and working long hours for low pay made health and social problems much more publicly visible. In earlier employment settings, such as the domestic system, the exchanges between workers, owners, and agents were usually based on personal relationships. The establishment of large factories destroyed those direct relationships, giving owners less opportunity to establish a personal interest in workers.

      In the past two centuries managers of industry have taken, in general, two broadly different positions regarding management's social responsibilities: one is marked by minimal involvement in the lives of workers, while the other entails involvement with workers both on and off the job.

      The first stance represents a combination of laissez-faire economic theory and the Protestant ethic as described by Weber. In this view the owner or manager has responsibility for the welfare of the workers only within the immediate plant situation. Coupled with this was the understanding that the firm's labour costs are the result of competitive market conditions. In this view, then, the owner's or manager's responsibility to his employees begins and ends with operating the firm in such an efficient manner that it can compete in the marketplace and create opportunities for workers. Furthermore, if all business managers follow a similar policy of intelligent self-interest, the broad social interests of society would be better served than by any other means.

      This managerial style has changed significantly over the years; today one hardly expects business leaders to state their position with religious overtones, and even the executive most inclined toward a laissez-faire viewpoint is likely to concede that there are some social problems that are not resolved by the pursuit of enlightened self-interest.

      The other stance begins with the assumption that management has a social responsibility to the communities in which its plants are located. If one states the situation in this general way, hardly a management spokesperson today would deny this social responsibility. Yet, when one gets beyond rhetoric, one finds a wide variety of views as to what actions—if any—management should take. In assessing the present scene, one might do well to examine the historical evolution of conceptions of management's social responsibilities.

      In the early part of the 19th century, the Welsh industrialist and social reformer Robert Owen (Owen, Robert) was the first manufacturer to back up words about management's social responsibilities with a program of action. Having risen out of the work force in a textile mill himself, he was concerned with the social and economic conditions of workers and believed that the economic success of an enterprise did not have to depend upon exploitation of labourers. In the mill town of New Lanarkshire, Scot., Owen built workers' housing, schools, and a store that were far superior to contemporary standards for workers' communities. His philosophy was influential in the development of the cooperative movement in England.

      Owen's ideas and the successful operation of his plant and community during his lifetime impressed many social reformers and the business community as well. His influence was clearly visible in the establishment of the industrial city of Lowell, Mass. Francis Cabot Lowell (Lowell, Francis Cabot) had visited England and Scotland to study textile mills and related community problems before launching his own enterprises in Massachusetts. He had found New Lanark far more in harmony with American ideals regarding the dignity of the individual than was the average English industrial plant of the time. Lowell faced a social problem of an immediate practical nature: he had to recruit a labour force, largely female, not available in the towns where he was building his plants. To meet this need, the firm built, in what came to be the city of Lowell, a number of boardinghouses especially for young women. Each house was under the control of a woman who was supposed to ensure the morality of her charges, and the young women were not allowed out of the house after 10 PM except with special permission. In addition, Lowell provided for the building of schools and churches. He and his associates also gave stimulus to the Middlesex Mechanics Association, which sponsored cultural and educational programs. In the United States Lowell was the longest-lived project of its kind and the one most admired by foreign visitors. Charles Dickens compared Lowell very favourably with the typical English industrial city.

      Later in the century George M. Pullman (Pullman, George M) fostered the construction of a community near the Pullman Palace Car Company (the town of Pullman, now part of Chicago) that would house all the employees and provide for all the essential facilities. In the early period of the Pullman Company, the quality of worker housing was notably superior to that of most other industrial workers. Yet another example could be found in Hershey, Pa., a site Milton S. Hershey (Hershey, Milton Snavely) chose in 1903 for a chocolate factory that evolved into a company town.

      Similarly noteworthy were the paternalistic steps Henry Ford (Ford, Henry) took to help workers make good use of their increasing affluence. Ford Motor Company instituted a small legal department to help workers with the complicated problem of home buying, and then Ford established what he called a sociology department. It was staffed with social workers who made home visits to workers' families to provide advice and help on family problems. Members of the department were also free to talk with workers within the plant during working hours in efforts to straighten out family problems.

      Company towns and the associated paternalistic view of the employment relation are still important in Japan and some other countries. A classic example is “Toyota City,” which provides housing and community services to Toyota employees.

      Yet company towns have also been centres of controversy. They have been the locus of some of the most bitter strikes (strike) in the United States—from Pullman in l894, through the Southern mill towns in the l930s, to Kohler, Wis., in the l950s. Whatever grievances workers have had in these situations, it is clear that economic issues do not offer a complete explanation of the bitterness of the disputes, in part because any grievance a resident may have is seen to be the fault of the company.

Responsibility to the community
      Most company officials recognize the need for firms to participate in the affairs of the communities in which they are located. Yet engagement with local communities can be difficult, especially for multinational corporations that operate plants in distant cities around the world. Many companies have sought to develop public relations and community service programs as a means of strengthening the organization's image. A plant manager's role may be defined to include representing the company in community activities and establishing ties with locally based business and professional persons. Thus, it is common to find the manager and other plant executives playing prominent roles in community fund drives and other service programs.

Plant closings
      Since the late 20th century, protests and debates over the issue of community responsibility have been ignited by corporate restructurings and plant closings that result in local job losses.Many closings are attributed to high local labour costs coupled with pressures from international and domestic competition; others stem from technological changes; and still others reflect new business strategies and priorities, such as taking advantage of cheaper labour costs by operating production plants in developing countries. Regardless of the causes, say labour leaders and community activists, employers should provide their workers and communities with advance notice of the closing; moreover, corporations should work with employee representatives and community leaders to investigate possible alternatives to closing or to ease the effects of job losses. Concern over this issue has led nearly all industrialized countries to enact legislation requiring companies to notify workers and communities of impending closings or mass layoffs.

      Over the years employers have had to broaden the scope of their responsibilities in answer to changes in the demographic makeup of the labour force and to various social issues that affect the employment relationship. For example, in the 1960s the United States enacted a series of equal employment opportunity laws, which forbid discrimination in employment on the basis of race, colour, creed, sex, age, or disability. Companies that do business with the U.S government have an additional obligation to demonstrate that they have taken affirmative action to provide job opportunities for women and minorities (minority).

      Since the 1960s, therefore, firms have carefully reexamined and upgraded their recruitment, selection, training (employee training), and promotion policies to eliminate discriminatory practices. The evidence on the job market status of blacks and women shows that, while these legislative and company-level initiatives have helped to reduce the income and employment differentials of blacks and women, sizable gaps in wages and occupational status still remain. Moreover, while most employers have eliminated overt forms of discrimination from their formal personnel policies, many observers believe that there is still considerable subtle discrimination that holds back women and minorities in organizations. Research has shown, for example, that some managers tend to bias their performance evaluations of women or minorities. Others unconsciously hold lower expectations for women or minorities or are uncomfortable dealing with them as equals or superiors.

      Because of their subtle nature these forms of discrimination are especially hard to eliminate from organizational life. Many firms make use of mentors (senior managers who look out for and provide career advice for junior employees), ombudsmen (third-party neutrals who help to solve conflicts and resolve problems in organizations), and peer support groups or networks to address discriminatory practices that impede the full utilization of all members of the work force.

Stakeholder versus stockholder
      Debates over the scope of corporate responsibilities have raised an important theoretical question that goes to the heart of the purposes and roles of the modern corporation. Does the corporation exist simply to maximize the value of its shareholders' investment? Or should a corporation recognize the interests of multiple stakeholders, including not only its stockholders but also its employees, communities, customers, suppliers, and the broader society in which it is located?

      This question takes on added importance in a world where capital is more mobile and corporate takeovers more plentiful, and where large corporations typically have multiple national allegiances. Proponents of the stakeholder model would argue for development of new forms of corporate governance where these multiple interests are represented in organizational decision making. Worker interests, for example, would be represented through the appointment of rank-and-file employees to corporate boards of directors—as they are in many European countries.

      American managers are often criticized for their failure to adopt a long-term view of the corporation's objectives, pursuing instead the immediate rewards of maximizing short-term profits. The adoption of a stakeholder view can also help reprioritize business strategies toward long-term goals and effects. The evidence supporting this belief comes from comparisons between American and Japanese firms. Overall, Japanese executives appear to take a longer and broader view of corporate objectives than do their American counterparts. One reason (but not the only one) for this is that the cost of capital is lower in Japan than in the United States. Therefore, Japanese firms can arguably achieve more favourable economic returns for their long-term investments than can comparable American companies. This allows Japanese executives to invest in new products and processes that will build and protect a stable employment base and allow the firm to grow over the long run, even though short-term profits may be sacrificed.

      A person who owns stock in a corporation would argue for a more laissez-faire, or free market, approach. While the long-run trend has been to broaden gradually the scope of the corporation's responsibilities to its communities and work force, corporate law in America still treats the maximization of shareholder wealth as the primary responsibility of firms and their top executives and directors.

The changing work force
      In the past, when one wanted to describe the demographic and social characteristics of the work force and the career patterns of its members, it was common to divide individuals into two categories: managers, or “salaried” employees, and workers, or “hourly” employees. The laws governing employment practices still make this distinction, as salaried employees are “exempt” from much of the wage-and-hour legislation that governs the rights of “nonexempt” hourly employees. However, increasing diversity in both the characteristics of the labour force and the organization of work have made these categories less helpful.

      Consider, for example, the degree to which women have become a significant presence in the American work force. In 1950 women accounted for roughly one-third of all paid workers, and by 1994 they represented nearly half—a proportion that remained more or less stable through the early 21st century. Just as this demographic change contributed to productivity, it also introduced new legal issues—and in many cases, new regulations—to the workplace.

      As demands for labour continue to grow, most of the new jobs in the United States will be created not in the large manufacturing firms but in the service sector, especially health services, business services, social services management, and engineering. The majority of these new jobs will be created by small rather than large firms. Furthermore, the educational requirements of the “typical” job are expected to continue to increase.

      Taken together, these trends worry many industrial relations personnel experts and managers, who fear a mismatch developing between the characteristics of future entrants to the labour force and the types of skills that will be in high demand. If this is true, considerable efforts will be required to coordinate the two. This in turn implies that individuals will need to engage in lifelong learning, training, and retraining and that firms will need to increase their training investment. The changing nature of the labour force further implies an increase in opportunities for women, minorities, and immigrants.

Interests, values, and expectations
      The interests, values, and expectations that workers bring to the workplace provide a useful point of departure for understanding how employees respond to managerial policies. While these psychological features vary among individuals, over time as workers move through different stages of their family and career cycle, and across nationalities, they do reveal certain similarities.

Assessing workers' interests
      There is a long-standing debate between psychologists and economists over how best to ascertain worker interests and expectations. Psychologists have traditionally used survey questionnaires and interviews to measure worker attitudes, values, and beliefs. Survey findings are applied to observable workplace behaviours such as job search, turnover, absenteeism, union organizing, and withdrawal from the labour force as a means of determining how an individual worker's expressed attitudes and beliefs correspond to his actions at the workplace. Economists favour direct observation and measurement of these observable behaviours. This provides evidence of what economists call “revealed preferences”—preferences that are revealed by actions taken. Both approaches are helpful in painting a complete picture of workers' views and the workplace outcomes that result from these views.

      Since work is in nearly all cases the most important source of a person's income, it is no surprise to find that all workers place a high value on the income and security their jobs provide. Survey responses and labour market behaviour indicate that workers expect their jobs to provide both adequate and fair compensation. Fairness, or equity, is normally determined by comparing one's wages and fringe benefits (fringe benefit) with those of others in the same occupation, area, industry, or organization. Failure to provide adequate and equitable wages has consistently been shown to lower workers' job satisfaction and to increase the likelihood that workers will either look for another job or take actions to increase wages through organizing a union or striking. Furthermore, there is no evidence that the expectation of high and equitable wages weakens as individuals move up the occupational ladder and receive higher pay. Even among professionals, pay dissatisfaction continues to be a strong predictor of job turnover.

      Most workers expect much more from their jobs than good pay. In fact, perhaps the most important long-run trend in worker values is the gradual expansion and broadening of worker expectations. Survey data have shown that the vast majority of workers throughout the industrialized world place a high value on such qualities as autonomy, opportunity for advancement, and the ability to have a say in how they do their work. Moreover, the higher the level of education, the higher the value workers tend to place on these aspects of their jobs. Given that educational attainment levels are gradually rising, these dimensions of employment are becoming more central to behaviour at the workplace. It is not surprising, therefore, that leading employers throughout the world have been seeking ways to enhance these qualities within their organizations.

Voicing workers' interests
      With broader expectations and higher levels of education also comes a more assertive labour force—one composed of people willing to voice their demands or expectations. The means chosen for expressing such demands will vary according to laws, cultural preferences, the availability of collective forms of representation, the degree of employer resistance, and employee preferences for either individual or collective action. For example, the right to organize and bargain collectively is provided by law in all industrialized democracies around the world, but this is not always the case in developing nations or in totalitarian states.

Individual and collective action
      There are wide variations in the means workers prefer to use to assert their interests at the workplace. Generally, workers with good educations and high occupational status are more likely to assert their interests individually rather than through collective bargaining. When organized, higher-level professionals such as doctors, lawyers, engineers, scientists, and middle managers tend to act through occupational associations rather than in broad-based unions with blue-collar workers.

      This occupational or professional approach helps to create and reinforce the professional ties and status of these groups as well as to bring their special needs to the attention of employers. Moreover, these groups tend to rely on the power they derive from their labour market and geographic mobility along with professional norms, licensing or certification procedures, and government-passed standards as much as, if not more than, they rely on collective bargaining. Teachers and other white-collar government employees represent a significant exception to this tendency. In the United States and many European countries, some of the fastest growing and most powerful unions represent government employees (such as the American Federation of State, County and Municipal Employees). Moreover, in some European countries an increasing number of white-collar and professional employees in the private sector have organized into unions and now negotiate collectively with their employers.

      It should be noted that blue-collar workers who have highly marketable skills derive individual bargaining power from their potential mobility. In general, however, blue-collar workers around the world are more likely to form unions and bargain collectively to promote and protect their interests.

Participative decision making
      How strongly do workers wish to take part in decisions that affect them? Do they want to be coequals with management on issues, or are their interests more limited? Such questions have been at the centre of historic debates among industrial relations scholars, practicing managers, union leaders, and public policymakers. The evidence is surprisingly robust over time and across national boundaries: workers reveal the greatest interest in participating in decisions that affect their immediate economic concerns and those that directly affect their specific job.

      Survey data collected from workers across 12 European and North American countries show that the majority of employees want a say in workplace decisions such as how they are to perform their jobs, how jobs are organized, and how problems related to their immediate environment are solved. An equally strong majority want a say on bread-and-butter economic issues such as wages, benefits, and safety and health conditions. Only a minority favour direct participation or indirect representation in the broad strategic business decisions normally made by high-level executives or a firm's board of directors. The one strategic issue that workers demonstrate real interest in influencing, however, is the role of new technologies at the workplace. When they can see a link between strategic managerial decisions and their own long-term economic and career interests, workers want to have a voice in those decisions.

      Given these broadly shared values and expectations, some of the particular work and career concerns of various occupational and demographic groups are examined below.

The work careers of managers and workers
Managers
      In all industrialized countries managers are typically recruited from among university or postsecondary technical-school graduates. Although there are exceptions to this pattern, it is becoming rare for blue-collar workers without a college or technical-school degree to rise beyond the level of first-line supervision into the ranks of higher management. Yet because few graduates fresh out of a university or technical school have the experience or background necessary to assume broad-based or high-level managerial responsibilities, most organizations invest heavily in systematic management training and development efforts. Moreover, there has been a great expansion in post-graduate management education in the United States. This trend is also taking hold in Europe.

Training and promotion
      An initial part of typical on-the-job training often involves socialization (social psychology) into the practices, values, and culture of the organization. Another source of training and development lies in the career paths and job rotation policies of the firm. One large multinational firm, for example, devised a 10-year management development plan for all its junior managers, assuming that within those 10 years the manager would change jobs at least five times. Each job change was expected to expose the junior manager to a different functional area, such as marketing, finance, technology or product development, and manufacturing. Each job change also was expected to increase either the level of responsibility or the number of people the manager supervised. This firm, like an increasing number of others, attempted to include international experience in the career path, especially for those young managers targeted early in their careers as having the potential to rise to the level of senior management.

      Many firms make an explicit judgment of this potential early in a manager's career and put those thought to have the most potential onto a “fast track” developmental path. In smaller professional organizations, such as law offices or consulting firms, a similar decision is made within the first five to seven years on whether to promote an individual to the status of partner in the firm. This “up or out” decision is analogous to promotion to tenure of faculty members in most universities at some point prior to the seventh year of service.

      Researchers have shown that managerial career patterns can be predicted quite accurately by the results of these early promotional outcomes. Some have used the analogy of a tournament to describe the process, in which “losing” at any step along the way significantly reduces one's chance of “winning”—that is, getting to the top of an organization or profession. Thus, a failure to get a promotion one expects (or that others expect a manager to get) often is a signal for the manager to look for opportunities in another organization.

Competitive pressures
      The competitive career environment described above can lead to considerable tension and stress among middle managers. This stress is intensified by the desire of many firms to reduce not only the number of levels in the management hierarchy but also the number of middle managers.

      Rapid changes in business practices, skills, and knowledge also create a strong demand for continuing education programs for middle and senior managers. Most leading business schools and many consulting firms offer various short refresher courses or short conferences to practicing managers. Many firms spend a significant amount of their training and management development resources on such programs.

      In large companies that have plants or offices in many different locations, moving up the managerial hierarchy usually requires a number of geographic moves. While employers normally give a manager the option to accept or reject a geographic transfer and promotion, individuals who want to rise in their organizations tend to be reluctant to reject such offers. Yet the process of selling a house and moving one's family to another community can be difficult, especially if both spouses have careers or their children have special needs. This tension between work and the responsibilities and priorities of family life is a growing concern in many leading companies, especially as the number of women managers and dual-career couples increases.

Blue-collar workers

Career structure
      The long-run income prospects of a blue-collar worker are heavily dependent on the amount and quality of basic education. Failure to complete high school reduces significantly one's expected lifetime earnings. Those who obtain post-high-school technical training through vocational schools, community colleges, or apprenticeship programs that involve both formal schooling and on-the-job experience can expect increased long-run earnings. By choosing a job that provides additional training opportunities, either on the job or through part-time outside course work, a worker further increases his or her earnings potential.

      The career of blue-collar workers can be divided into four parts: initial education and entry-level training period, trial or job-matching period, stable period, and retirement. Thus, the initial career stage is one in which an individual is investing in education or, as social scientists put it, building human capital. Failure to complete high school or to acquire basic mathematical, verbal, and analytical skills not only limits long-run earnings but also increases the risk of being unemployed for longer periods than for those who invested more time and energy in this period of education and training.

      In searching for a job, blue-collar workers tend to rely heavily on informal contacts and information provided by friends, family members, or school advisers. Following the completion of schooling and entry-level training, most workers experience a trial period in which they change jobs a number of times in search of a good match between their abilities and aspirations and the opportunities available to them. The average U.S. worker changes jobs six to eight times before settling into a stable employment relationship, while the average worker in Europe and Japan will hold many fewer jobs over a career. (The relative stability in Japanese and European employment patterns may, however, be disappearing.) Some of this job movement may be involuntary, because many firms follow a seniority rule in laying off workers (that is, the most junior workers are laid off first).

      Blue-collar workers generally experience their most stable period of employment between the ages of 30 and 60. As family responsibilities expand and seniority on the job increases, the likelihood of staying with a given firm also becomes greater. The potential costs of a job change or a job loss also tend to mount over time, as it becomes harder to find a job with another company that can match the level of wages and benefits often achieved after years of service and internal promotion.

      Workers face new choices as they approach the retirement stage of their careers. A recent trend can be illustrated with an example from the United States: although American firms are no longer allowed to impose a mandatory retirement age (old age), few blue-collar workers choose to stay at the job beyond the customary retirement age of 65. Instead, an increasing number of workers retire and then take part-time jobs. This trend may be caused by the early retirement incentives many firms offer to employees. The practice has also contributed to the growing number of older workers who are employed on a part-time basis.

Attitudes toward work
      Along with the stages in workers' careers go shifting attitudes toward their jobs. When workers remain with the same company, their outlook on the job and the company tends to follow a curvilinear pattern: high at first, then dropping through the middle period, and rising in the later parts of their career. Individuals tend to begin work with such unrealistically high expectations as to the nature of the jobs and the opportunities before them that disillusionment later sets in; but after some years they adjust themselves, lower their expectations, and express more satisfaction with the work situation.

      Interest in joining a union or in becoming a leader in the union tends to follow a reverse curvilinear path. Interest is low at the beginning of tenure with a company because of the uncertainty over how long the worker will stay with the firm and because satisfaction with a new job is generally high. Over time job satisfaction may decline, accompanied by an increased interest in changing work-related conditions. Only as retirement approaches and the costs of leaving the firm become untenable does job satisfaction again rise, thereby lowering the worker's tendency to participate in aggressive efforts—such as union organization—to change the work situation.

      A number of studies have shown that few blue-collar workers want to leave their community when a production plant or office shuts down. Ties with friends and family make workers reluctant to leave. They may also find that housing costs are much higher in communities where job opportunities are plentiful. Blue-collar workers and their families are therefore likely to conclude that it is best to stay where they are in the hope that the local job market will pick up.

The work careers of service (service industry) workers and technical professionals
Service-sector workers
      Most research on the careers and expectations of workers comes from blue- and white-collar workers employed in manufacturing industries. Yet the manufacturing sector is shrinking in comparison with the service sector. In most advanced industrialized economies, more than half of private-sector workers are employed in services, compared with approximately 20 percent in manufacturing.

      It is difficult to make generalizations about the nature of service-sector employment and careers, as the jobs vary widely. For example, while average wages in service-sector jobs are lower than average wages in manufacturing, the wage differential between the best and the worst jobs in services is also larger than the comparable differential in manufacturing. This greater inequality of income (and skill requirements) helps explain why workers who are displaced from manufacturing jobs experience, on average, significant pay cuts when they take new jobs in the service sector. The best predictor of the size of the difference in pay between the job lost and the new job is the amount of education and transferable training the worker possesses. Again, education and training are critical not only to income but also to job security and career advancement.

      Service-sector jobs differ in several other important dimensions. First, the ratio of women to men in service jobs is much higher than in manufacturing. Second, service firms employ a relatively large and growing number of part-time workers; some work part-time by choice, while others move to a full-time job only when and if one is available. Third, low-paid service jobs tend to have high rates of turnover and lack many of the fringe benefits, training opportunities, seniority rules, and union protections found in the more stable and better-paying manufacturing jobs; this is not the case, however, for high-paying professional service and public-sector jobs. Finally, service firms tend to be smaller in size and more vulnerable to changes in market or technological developments outside the control of their owners. For all of these reasons, the shift in the labour base from manufacturing to services has engendered vigorous debate over the ability of these new jobs to meet the high and ever-expanding expectations of the work force.

Technical (technology) professionals
      The first research in industrial relations focused on blue-collar workers. Gradually attention spread to foremen and then to higher levels of management. Considerable attention has also been devoted to the study of scientists and engineers who work in industrial organizations. Interest in such technical professionals reflects the importance organizations attach to the development and use of new scientific discoveries and technologies. How well these technical professionals—and the research and development processes they engage in—are managed can have substantial effects on the long-run profitability of a firm and on the competitiveness of the larger economy.

      Scientists or engineers are often thought of as solitary individuals who work in a laboratory on some abstract problem or idea. While this may accurately represent a relatively small number of scientists who work on basic research, the vast majority of technical professionals in organizations actually work together in teams or project groups on applied research and development tasks. Their primary role is to transfer new scientific discoveries or ideas from the laboratory to manufacturing and out to the marketplace by creating new products or technologies. These company-wide project teams often include specialists in marketing, manufacturing, and human resources management as well as representatives of various scientific disciplines or technical specialties.

Interests and concerns
      What do technical professionals want from their jobs and careers? Like all other workers, scientists and engineers are concerned about their employment security and long-term career opportunities, especially because their job security can depend on winning contracts from customers or on obtaining budget funds from top managers. This uncertainty leads some firms to try to keep their permanent research and development staffs rather small; additional engineers or technicians are hired as consultants on a contract-by-contract basis.

      Like other professionals, scientists and engineers also want to gain the respect of peers in their field of work. Recognition of this desire led many early researchers to speculate that these professionals were more interested in contributing to science than they were in meeting the needs of their particular employer. Later research showed, however, that most technical professionals also want to work on problems that are critical to the success of the firm. They want to understand the firm's goals and be given an opportunity to help meet them. Above all else they seek important and challenging projects that are accompanied by the resources, influence, and autonomy needed to complete the projects successfully.

Career paths
      Not all technical professionals want to remain in technical jobs throughout their careers. Some aspire to move into management; others want to continue to do technical work but want the status and economic rewards that normally come with promotions to higher management. This has led many organizations to establish a dual-ladder, or dual-track, progression system. Individuals in mid-career can seek promotions to more senior assignments on the technical ladder or to administrative positions on the management ladder. In theory the steps on each ladder are supposed to provide equivalent economic rewards, influence, and status. In practice, however, the management track usually provides broader exposure within the organization and thus better access to senior executive positions. Experience has shown that dual-ladder systems are extremely hard to administer.

Organized research and development
      In the past, research and development work was organized in a linear fashion, with a project passing from one group of specialists to another until it was ready to be given to the manufacturing section. The metaphor of “throwing it over the wall” was often used to describe this mode of organization, signifying both the serial and the isolated nature of each stage of the process. Research evidence convinced most organizations that this was very inefficient and time-consuming, and firms now encourage more cross-functional communication and participation by bringing together teams of representatives from each stage of the development process. The goal is to coordinate the process better and to identify and avoid problems that otherwise might be discovered only at a later stage. Specific management techniques—such as quality circles (small, project-oriented teams comprising representatives from all relevant areas of the company)—reflect one way organizations attempt to improve communication and increase productivity.

      To work effectively in these cross-functional project teams, scientists and engineers must have both up-to-date knowledge of their technical disciplines and skill in the communication, problem-solving, and group decision-making processes essential for successful teamwork. Universities have developed curricula to teach these skills, while organizations reinforce them through their career-development paths and reward systems.

      One key to the success of the research and development process is the project leader, who must motivate, lead, and coordinate team members. At the same time, the leader must represent the group's interests in the larger organization by serving as an advocate for the team's project and by winning the support and resources needed to get the job done. In the end, it is the project leader who is responsible for keeping the project on schedule and within budget.

Organizational design
      A central task of management is to reach the organization's goals by motivating individual workers and coordinating their diverse efforts. Although the concepts and methods used to structure work have changed considerably over the years, many firms see no need to change their methods of management. As a result, a company's age is often indicated by the way work is structured, because work practices tend to reflect the organizational structures and methods that were common when the organization was founded. Although most firms draw from the strengths of various managerial forms, work structure can fall into one of two categories: those that are hierarchical and traditional and those that are participatory and flexible.

Specialization of function and separation of authority
      Much of the early thinking about organizational design can be traced to the influence of Frederick W. Taylor's (Taylor, Frederick W.) scientific management movement and the division-of-labour concepts found in Max Weber's (Weber, Max) description of the ideal bureaucracy. Although many of these concepts originated in the 19th century, they endured because they advanced the needs of the modern corporation, which has come to be defined by its multiple divisions and functions. Formal bureaucratic rules, specialization of functions, and close supervision proved suitable for disciplining and directing an immigrant and poorly educated labour force in factories geared to mass production markets. The phenomenal success of manufacturing organizations in the first half of the 20th century reinforced managerial faith in these systems and provided workers with sufficient improvements in income and standard of living to support their continuity. Furthermore, labour movements adapted well to this organizational framework, and the collective bargaining systems that developed in the 20th century provided workers with the opportunity to have their voices heard, if only indirectly, through union representatives. As a result, unions strengthened the division of labour in industrial settings.

      Taylor's concept of scientific management (industrial engineering) was based on a clear separation of authority between (a) the engineers and supervisors, who decided how to organize the work, and (b) the production employees, who carried out their boss's orders. Scientific management also emphasized narrow job definitions and clear divisions of labour between jobs, thereby accommodating the low levels of education or skills expected of production workers. Finally, scientific management emphasized individual incentive wages. In this way, companies sought to maximize employee motivation by paying each worker for the output he or she produced. This approach was also meant to overcome any presumed conflict of interest between the worker and the firm.

      When the industrial unions (industrial union) that grew rapidly after the 1930s inherited this form of work organization, they generally accepted it, but they codified job descriptions, negotiated wage rates for each job, and established principles of seniority to govern worker rights to different jobs and workplace benefits. All these provisions were written into a collective bargaining contract, and disputes over interpretation of the contract were resolved through grievance arbitration.

      The production area was not the only part of the organization to undergo such rigid job classification. A company's managerial and technical hierarchies were also structured according to job functions or department classifications. Specialization of function and clear lines of authority separated managers so that each was assigned to one department (such as marketing, sales, finance, personnel, production, or engineering). Within the engineering and new-product development process similar specialized tasks separated design engineers, manufacturing engineers, industrial engineers, and so on. As departments and managerial tasks grew more specialized, a large cadre of middle managers was required to produce the financial and performance reports needed by top executives for monitoring and directing company-wide operations.

      These organizational design principles allowed large manufacturing firms around the world to use their economies of scale to improve productivity and increase profits. Sharing the fruits of these economic returns with the labour force in turn produced a stable industrial relations system.

Participatory management and flexible work systems
      By the 1960s many of these traditional principles of organization and work group design were being challenged by early advocates of participatory management. Arguments for enlarging the scope of responsibilities and influence of individual workers were presented as better means of motivating workers and increasing job satisfaction. While these ideas gained favour in a number of the new companies and high-technology industries that grew rapidly through the 1960s and '70s, it was not until the following decade that they began to gain support within older organizations in the manufacturing and service sectors.

      Competition from other countries magnified the significant productivity and quality performance problems that most American firms faced in the 1980s. At the time, Japanese and some European firms outperformed their American counterparts by adopting flexible work systems and participatory management practices. Japanese manufacturing firms in particular had instituted practices such as quality circles that were designed to produce continuous improvement. These approaches, articulated first by W. Edwards Deming (Deming, W. Edwards), relied on knowledgeable workers who were authorized to interrupt the production process when they detected defects.

      The development and implementation of electronic and computerized technologies that began in the 1980s reinforced the need for flexibility in the work organization. Competitive pressures continued to break down many of the traditional dividing lines that had grown out of older and more restrictive job definitions.

      Critics of the new technologies argued that these approaches essentially took jobs away from many clerical and blue-collar workers while also giving managers new methods for controlling employees and invading their privacy. For example, computers (computer) and surveillance cameras can monitor the work of machine operators and therefore serve as a new form of electronic supervision. This approach replaces the personal presence and control of the supervisor or production foreman. The introduction of new technologies also displaces—and in some cases replaces—personnel, posing a threat to the job security and economic well-being of the workers affected. Thus, a critical challenge facing managers, worker representatives, and public policymakers lies in the management of technological and organizational change that will benefit not only individual firms but also the work force and the larger society.

Union–management relations
      Of all the conflicts found in industrial organizations, those involving unions and management have received the most attention. Labour unions are the primary means workers have for advancing their collective interests at the workplace. Much of the history of industrial relations is filled with efforts on the part of workers to gain the right to organize into free trade unions—that is, worker organizations that are controlled neither by employers nor by a government.

      While the actual percentage of workers who are organized into unions varies considerably from country to country and over time within individual countries, it is safe to say that there is no democratic country in the world where independent trade unions are not present. Unions serve an essential role in a democratic society by giving voice to worker interests. The best evidence of the importance of this function is that unions are often among the first institutions—along with the church and the press—attacked by totalitarian regimes.

      Unions and union–management relations are also of special importance in that, through collective bargaining and other formal and informal means of interaction, unions and employers establish the wages, hours, and working conditions of large numbers of workers. In countries such as Sweden, Denmark, and Norway collective bargaining covers more than 80 percent of the labour force. In Britain (United Kingdom), Germany, and Japan it covers between one-third and two-thirds. Even in countries like France or the United States, where less than 20 percent of the workers are unionized, collective bargaining often sets new patterns in wages and other conditions of employment that are eventually adopted by nonunion employers.

      It should be noted that employers are often reluctant participants in collective bargaining. While the degree of opposition to unions varies among countries, this opposition is perhaps strongest in the United States, where employers have aggressively opposed unionization of their employees. This is one of the reasons why the right of employees to organize and bargain collectively is normally protected by law.

      The decades of the 1980s and '90s were a time of tremendous pressure for change in union–management relations around the world. This pressure came from increases in market competition within and between countries, the rapid rate of technological progress, the changing nature of the work force, shifts in jobs from highly unionized large manufacturing firms and industries to smaller, newer firms and service industries, and, in some countries, the election of governments less supportive of unions. As a result unions in the majority of industrialized countries have lost membership and continue to debate how best to adjust their strategies and practices to their changing environments. The following discussion, therefore, focuses both on the traditional union–management practices that have dominated relations since the 1930s and on how these practices have responded to pressures for change.

Union organizing
      The typical way in which workers become organized into a union in the United States is through an election campaign and vote on representation. A majority of workers must vote in favour of union representation and collective bargaining. In these campaigns arguments about the need for a union and the benefits of collective bargaining are countered by employer efforts to convince workers that they do not need a union. American workers historically have taken a pragmatic approach to this choice: they vote in favour of union representation only when they are highly dissatisfied with their employer and when they see union representation as a viable means of improving their employment conditions.

      In the case of clerical and professional employees, unions have appealed by arguing that one need not see the employer as hostile or untrustworthy to believe in the need for collective representation. When an organizing drive took place among clerical and technical employees at Harvard University, for instance, the union campaigned on the slogan, “It's not anti-Harvard to be pro-union.” While this approach has gained favour among white-collar and professional workers, it still is the exception rather than the rule for these workers to join a union, with the notable exception of government employees.

      Sometimes employers voluntarily recognize the union or remain neutral in the election process. This is most often the case in the public sector. Some private-sector employers have voluntarily recognized unions in new establishments in return for union cooperation and participation in the task of designing the work system, training the work force, and starting up operations. Such accommodation, however, is the exception in the United States; the typical picture of an organizing drive is still one of aggressive union campaigning in the face of aggressive employer opposition.

      The more adversarial the organizing campaign, the more likely it is that the bargaining relationship will develop along similar adversarial lines. Conversely, the less resistance to organizing by the employer, the higher the likelihood that the union–management relationship will evolve along cooperative lines. For example, one large manufacturing company that voluntarily recognized a union in the 1940s, and has remained neutral in organizing drives held in new plants opened since then, has experienced only one brief strike in its entire history. This record stands in marked contrast to the pitched organizing battles and frequent strikes experienced over the years in the rubber, meat-packing, and coal-mining industries.

Collective bargaining
      What effects do unions and collective bargaining have on the outputs of the employment relationship that are of greatest interest to workers, employers, and the larger society? The historical evidence is that unions improve the wages, hours, and working conditions of their members. Perhaps the biggest and most direct effects have been on wages and fringe benefits (fringe benefit); estimates indicate that unions have raised the wages and benefits of their members by 15 to 30 percent above those of comparable nonunion workers. Unions have also pioneered over the years in introducing an expanded array of fringe benefits such as paid vacations, sick leave, pensions, seniority provisions, apprenticeship and training programs, and grievance procedures for resolving conflicts on a day-to-day basis.

      Assessing the effects of collective bargaining on the goals of the firm is a more difficult task. Historically, unions have served to encourage greater formalization and professionalization of personnel management practices. By increasing wages and related labour costs, unions have also encouraged employers to take actions that improve labour productivity. But the evidence is that, overall, unions reduce returns to shareholders, in part because they increase the cost of labour.

      Some behavioral scientists distinguish between “distributive” and “integrative” bargaining. Distributive bargaining is essentially a win–lose engagement. What one party “wins” through hard bargaining comes at the expense of the interests or goals of the “losing” party. In contrast, with an integrative bargaining approach the parties engage in cooperative problem solving in an effort to achieve a resolution from which each party benefits.

      In reality, most bargaining relations are mixed-motive in nature; that is, they have both distributive and integrative features. In the 1980s, however, the pressures on labour and management to solve complex problems intensified and therefore strengthened the efforts of many unions and companies to develop integrative relationships. The scope of labour–management relations expanded to include more opportunities for employee participation and union consultation in managerial decision making. Again, these innovative relationships did not spread to large numbers of bargaining relationships. Instead, sustained innovation and cooperation tended to be limited to environments in which the economic pressures for change were intense and the company was willing to share influence and power with the union and accept union leaders as joint partners in the enterprise.

The workplace in different cultures
      Do the principles of organizational behaviour and industrial relations apply universally across nations and cultures? This issue not only has fascinated scholars and policymakers but, at critical points in history, has influenced the course of international events. After World War II, for example, the head of the U.S. forces occupying Japan imposed American-style labour laws and industrial relations practices under the belief that they would help ensure that Japan would not fall back into a militaristic or totalitarian state. By the 1980s the situation had reversed. Many American experts called for adoption of Japanese management practices in hopes of achieving the same high productivity, quality, and cooperative labour–management relations found in leading Japanese firms.

      In both of these instances some practices were effectively transplanted to the other country. Free trade unions and collective bargaining did evolve in postwar Japan, albeit not in the same fashion as they had in the United States. The success of Japanese management prompted many American firms to reexamine their own policies and practices and to implement certain principles of the Japanese system. This has been the case in American manufacturing, especially in the automotive industry, where the success of Japanese “transplants” (Japanese-managed plants operating in the United States and staffed with American workers) has convinced American auto executives that the Japanese approach works. This approach organizes workers into teams and promotes such practices as labour–management cooperation, worker participation, training in quality control, and just-in-time inventory systems, all of which contribute to higher quality and productivity than that produced by traditional American practices.

      It should be noted, however, that practices that are successful in one country may fail in another; imitation does not guarantee success. To understand why, and to explain why practices vary among nations, one needs to consider differences in national cultures, political and economic conditions, timing of the industrialization process, and key historical events that affect different countries. The comparative analysis that follows briefly reviews how these factors have influenced industrial relations in the United States, Japan, and Germany. These countries are often compared, because all three have achieved high rates of economic growth, productivity, labour peace, and improved standards of living, yet these results have been achieved through very different institutions and practices.

      Perhaps the value most closely identified with American culture is that of individualism. The importance of individualism can be seen in organizational systems of authority and conflict resolution, where subordinates are free to question the orders of superiors and may attempt to resolve differences in a one-on-one fashion. The expected response to individual ambition and achievement is reward and promotion, and individuals normally turn to collective actions only when frustrated with organizational responses to individual efforts.

      The broader economic and political context in which organizational and industrial relations developed has been one that places a high value on the role of the free market (capitalism) and minimizes government intervention in private enterprise. This ethos was particularly strong during the period of rapid industrialization between the late 1800s and the 1920s. The economic and social shock of the Great Depression modified this position considerably, however, and since then the American public has expected the government to play a more active role in regulating economic policy and industrial relations practices. Still, the view favouring decentralized institutions, industrial self-governance, and free enterprise has kept industrial relations focused at the level of the firm.

      Given these values, it is not surprising that the greatest conflicts in American industrial relations tend to arise over efforts to unionize a company and over negotiation of the specific terms of an employment contract. The value Americans place on individualism and mobility also helps explain why turnover rates tend to be higher in American firms than in many other countries and why cooperative labour–management relations are difficult to sustain.

      Shimada Haruo, a leading Japanese industrial relations scholar, has maintained that one cannot comprehend Japanese industrial and organizational practices without recognizing that Japanese managers regard human resources as the most critical asset affecting the performance of their enterprises. Therefore, management in large Japanese companies is deeply committed to developing and sustaining effective human resource and industrial relations practices. Many Japanese observers go on to argue that this assumption grows out of Japanese culture and traditions. Shimada points out, however, that this cultural thesis fails to explain the changes in management and labour practices that have occurred over the years. Thus, he and most other contemporary scholars of Japanese practices stress the interactions of cultural, economic, and political events that shape organizational relations in the country's industries.

      Japanese culture places a high value on family relations and obligations, and some analysts claim that this family model carries over into the workplace. Employers are expected to show the same regard for their workers as a parent shows for other family members. Unity within the firm becomes a central value and corporate objective. In turn, employees are expected to show strong loyalty to their employer. It should be noted, however, that employment relations can be quite different in the smaller Japanese firms that supply the giant producers and exporters. The smaller companies have a tenuous existence and cannot guarantee secure employment or make substantial investments in employee training.

      Employees in large Japanese firms exhibit fewer traces of individualism and place more emphasis on group relationships in the design of work and in their day-to-day workplace interactions, especially when compared to their Western counterparts. Direct conflict in organizational decision making is discouraged in favour of a more informal group consensus building. Authority is respected so highly that the outcomes of group problem-solving tasks will tend to reflect the views or preferences of senior managers.

Prewar industrial relations
      From the early days of industrialization, Japanese employers, labour leaders, and bureaucrats were divided over whether Western-style conflicts between management and labour were inevitable and whether Western models of unionization and dispute resolution were appropriate models for Japan. Many employers (and, in the nationalistic l930s, some labour leaders) argued that Japan's “beautiful customs” of benevolence from superiors and loyalty from subordinates made the Japanese family a more appropriate model for industrial enterprise. Between l920 and l93l government policymakers brought forward eight proposals to provide a legal framework for the establishment of labour unions, but each was defeated by vigorous opposition from employer associations and politicians. At its peak in l93l, the union movement had reached only 7.9 percent of the total industrial labour force. Large-scale enterprises were particularly successful in forestalling the formation of unions, and several developed alternative “Japanist” models of paternalistic management. With the outbreak of World War II, the union movement was brought to a halt.

Industrial relations after World War II
      Japan's rapid economic growth from the mid-1950s through the 1980s propelled its industrial relations and organizational practices into the centre of international attention and debate. Three interrelated features of the system have attracted the most attention: (1) enterprise unions (enterprise unionism), (2) high levels of labour–management cooperation and cross-functional problem solving, and (3) lifetime employment security.

      In the immediate postwar period the lifting of restrictions on unionization resulted in a wave of labour activism and unrest. Alarmed by the radicalism of the industrial union movement and the active involvement of the Communist Party at the movement's national level, the Japanese government and the American occupation authorities launched a counteroffensive (the “Red Purge” of l947–48) to deny union rights to Communist-backed organizations. The newly formed Japan Federation of Employers' Associations (Nikkeiren) embarked on a campaign to form moderate, anti-Communist enterprise unions that included lower level management personnel as well as production workers.

      Employers made important concessions to the labour movement, including employment security, seniority-based wage systems, and twice-yearly bonuses negotiated each year along with base-pay increases. These accommodations, along with the cultural traditions that influenced behaviour at the workplace, shaped the large-scale enterprises that led Japan's remarkable economic growth from the mid-l950s to the mid-l970s. Even the slowdown in growth that followed the l973 Arab oil embargo did little to shake the implicit security of employment. Those industries that faced the most severe business declines—shipbuilding, steel, aluminum processing, and petrochemicals—softened the effects of layoffs through outplacement programs (often in cooperation with affiliated companies), government-subsidized retraining programs, and diversification.

labour–management cooperation
      Low levels of conflict, even in declining industries, are characteristic of the generally cooperative relationship between managers and workers in Japan's large private-sector firms (it should be noted that these relations are more conflictual in the public sector). This may be the case because blue- and white-collar workers belong to the same union, meaning that there are fewer lines of demarcation between these groups. In most enterprises, for example, the scale of management bonuses is tied to the size of bonuses for blue-collar workers. Many senior Japanese executives served as union leaders in their companies at earlier stages in their careers.

      In part because the union leader of today may well be the manager of tomorrow, large firms generally practice union–management consultation over broad strategic issues. They also cultivate employee participation in some problem solving and solicit recommendations for improving the workplace. Quality circles and employee suggestion systems are widespread. Problems in product and technological development are more easily identified and solved by employing cross-functional teams and by a career development strategy that provides engineers and managers with job experience in multiple functions, including working on the factory floor.

Employment security
      Lifetime employment security is not guaranteed by law or contract but is embedded in the business and human resource planning policies of large firms. Recruitment, training, compensation, and internal promotion policies are designed to facilitate lifetime employment. Growth in company size and stabilization of employment are high priorities for Japanese executives. Generally, Japanese firms accept the stakeholder view of corporate objectives more readily than do their American counterparts. A stakeholder can be anyone with an interest in the firm—employees, customers, suppliers, owners, or even the general public.

      In most large Japanese firms, employees are hired immediately upon completion of their education and are expected to stay with the firm until they retire. In return, the company invests heavily in employee training and development. Layoffs are carried out only as a last resort, even during periods of technological change or a downturn in the business cycle. Wages (wage and salary) in Japanese companies tend to rise with seniority, and most job openings within the blue-collar and managerial ranks are filled through internal promotions rather than by hiring from the external labour market. These combined features limit the likelihood that workers or managers will make mid-career transfers to other companies, because the cost of leaving a firm that offers lifetime employment security will be too high.

      It should be noted that these aspects of Japanese employment relations do not apply to all firms or all workers. Security of employment, for example, is also supported by a large number of small firms and subcontractors. These smaller companies often employ many retired workers, immigrants, women, and those who have not found work or have lost their jobs in the large firms. While the law forbids discrimination against women and minorities, Japanese women traditionally have been excluded from the lifetime employment system and from higher-level jobs in corporations.

      The industrial relations system of the Federal Republic of Germany (Germany) presents an interesting contrast to both the American and Japanese models. The key characteristics of the German system are (1) industrial unions and industry-wide collective bargaining, (2) formal structures for employee representation in management decision-making processes, and (3) the close integration of formal education and training with human resource practices within firms.

      Unlike their Japanese counterparts, few scholars of German institutions emphasize the centrality of culture when characterizing industrial relations in Germany. Instead, attention focuses on the legal framework and organizational structures created in the aftermath of World War II. This is not to deny the influence of German culture, which is evident in the strong work ethic and the deep respect for the values of community and authority.

      These qualities can be seen in the industrial relations system that began to emerge during the time of the Weimar Republic, between 1919 and 1933. In this era the factory (factory system) came to reflect the values of the society and to serve as an industrial community or plant family. In 1918 a compromise was reached between the ruling authorities and the German labour movement in which unions were recognized by the government and employers. In return unions accepted the basic rules of a capitalist economy despite their socialist rhetoric to the contrary.

Industrial unions (organized labour)
      Nazi (Nazi Party) rule from 1933 to 1945 suppressed free trade unions. Following the war, development of the German labour movement paralleled the union structures that were emerging in the American manufacturing sector, with unions eventually representing about 40 percent of the German labour force. A sharp drop-off in the 1990s brought union membership down to about 25 percent of the labour force. Contemporary German unions operate on an industry-level system of collective bargaining, and firms within each industry are represented by employer associations that serve as their bargaining agents with the industrial unions.

      Government policy supported industry-level bargaining by enacting legislation that extends the basic wage and fringe benefit patterns negotiated in collective bargaining to cover workers in the nonunionized firms of each industry. These industry-level negotiations are supplemented with tripartite (government–union–employer) consultations at the national level over larger economic, social, and employment policy issues. Industrial relations in Germany reflect a respect for employee rights and a preference for negotiation rather than open conflict or challenge to authority.

Consultation and codetermination
      In addition to collective bargaining, both union and nonunion German workers are represented formally by works councils that are required by law to exist within establishments employing 20 or more workers. Works councils are representative bodies elected by all the employees in an enterprise. Management must consult with works councils on a broad range of employee issues, including questions of adjustment to technological change, safety and health, training, and layoffs.

      German law also provides for a system of “codetermination,” or worker representation, on the supervisory boards of large companies. (Supervisory boards are similar to the boards of directors in American firms.) The supervisory board appoints executives to top management positions, including the Arbeitsdirektor, or personnel director. This person must be approved by the majority of the worker representatives who sit on the supervisory board. In this way, workers are provided a voice at the highest level of managerial decision making in large companies. This points to a stakeholder view of the corporation.

Education and training
      Human resources management in German firms is rooted in the country's highly structured education and apprentice-training system. Tracking begins at age 10, when a small percentage of the most academically talented students (most of whom do not come from working-class families) enter a college preparatory program and go on to obtain university degrees and jobs in their chosen professions. About 70 percent of German students are tracked into a vocational education and training system. At age 15 those in the vocational track begin a three-year apprenticeship program that splits their time between classroom instruction and on-the-job training in German companies. Upon completion of this apprenticeship they are certified in their trade. Further occupational mobility at later stages of a worker's career depends in large part on receiving additional training and professional certification. This system provides general training that is transferable to other enterprises, making it possible for workers to move from one firm to another.

      The high degree of skill training combined with a strong work ethic reduces the need for close supervision. Studies have shown that German firms tend to have fewer supervisors than are typically found in comparable concerns elsewhere in Europe or in America. Finally, the heavy role that business enterprises play in the training and socialization of their workers helps explain why surveys have found German workers to be deeply committed to their jobs and to exhibit strong allegiance to their organizations.

Common challenges
      Together, comparisons of the American (United States), Japanese (Japan), and German models illustrate that, while institutions are consistent with each country's unique cultural, economic, and political environments, all industrial relations systems ultimately face the same fundamental issues. They all must devise policies and institutions that can meet workers' expectations and enhance productivity. Industrial relations systems must also provide employees with a means of expressing their needs at the workplace while offering steps for resolving the conflicts that inevitably arise between workers and employers. How well an industrial relations system performs these functions has a major effect on the welfare of individual workers, their employers, and the society in which they live.

William Foote Whyte Thomas A. Kochan Michael T. Hannan Ed.

Additional Reading
Important works in the field of industrial relations include Sidney Webb and Beatrice Webb, Industrial Democracy, 2 vol. (1897, reprinted in 1 vol., 1965), a classic theory in the British socialist tradition; John R. Commons, Institutional Economics: Its Place in Political Economy (1934, reprinted in 2 vol., 1990), a summary of theoretical ideas by the father of American industrial relations research; John T. Dunlop, Industrial Relations Systems, rev. ed. (1993), a theoretical model that shaped the study of industrial relations between 1960 and 1980; Jack Barbash, The Elements of Industrial Relations (1984), a modern statement on the nature of the employment relationship; Richard Hyman, Industrial Relations: A Marxist Introduction (1975), an interpretation by a Marxist; Thomas A. Kochan, Harry C. Katz, and Robert B. McKersie, The Transformation of American Industrial Relations (1986, reissued 1994), a study offering a strategic-choice model for interpretation of industrial relations; James N. Baron and David M. Kreps, Strategic Human Resources (1999), a sociological and economic approach to understanding employment relations; and Richard E. Walton and Robert B. McKersie, A Behavioral Theory of Labor Negotiations: An Analysis of a Social Interaction System, 2nd ed. (1991), a classic theory of the dynamics of negotiations. Taishiro Shirai (ed.), Contemporary Industrial Relations in Japan (1983), is a survey of the evolution of Japanese industrial relations from World War II to the end of the 1970s; and Wolfgang Streeck, Industrial Relations in West Germany: A Case Study of the Car Industry (1984), is an in-depth look at the German industrial system.Leading works in the area of organizational behaviour include Chester I. Barnard, The Functions of the Executive (1938, reissued 1979), a classic statement on the nature of organizational relations by a prominent executive of his time; Michel Crozier, The Bureaucratic Phenomenon (1964, reissued 1967; originally published in French, 1964), an insightful study of organizational behaviour in France; James G. March, Herbert A. Simon, and Harold Guetzkow, Organizations, 2nd ed. (1993), a theoretical analysis based on a decision-making approach; Douglas McGregor, The Human Side of Enterprise, annotated ed. (2006), a study of two contrasting sets of assumptions managers make toward employees' motivations and of the effects of these assumptions on managerial behaviour; Industrial Democracy in Europe Revisited (1993), a comparative empirical study of worker participation conducted by an interdisciplinary team of researchers from 12 European countries; and Michael J. Piore and Charles F. Sabel, The Second Industrial Divide: Possibilities for Prosperity (1984), a discussion of the changes in work organization and relations in response to changing technologies and market conditions. A study of the changing work force is Haruo Shimada, Japan's “Guest Workers”: Issues and Public Policies, trans. from Japanese by Roger Northridge (1994; originally published in Japanese, 1993), which examines the implications of immigrant labour in Japan.Thomas A. Kochan

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Universalium. 2010.

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