Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
The Role of Relationship Capital within the Trade Unions for
Labour Management Relationship
Jacqueline Koh*, Lailawati Mohd Salleh**, Zuraina Dato’ Mansor *** and
Naresh Kumar ****
For few decades, prominent scholars have discussed about weak trade
unions’ movement throughout the world. Numerous external factors such
as legislation, economic and globalization as well as internal factors such
as trade unions’ commitment were identified to contribute to this scenario.
Weak trade union movement reflects the weak bargaining power of the
trade union in improving the terms and conditions of employment for the
trade union members as well as for other employees in the organization.
Hence, many scholars debated on strategies to increase the trade union’s
bargaining power particularly on the external factors. Meantime, other
scholars focused on the problems occurred within the trade union mostly
looking at the trade union’s commitment. Based on the extensive literature
review, this paper reveals the important role of union relationship capital in
improving the trade unions’ bargaining power and labour-management
relationship in the organization. It is suggested that trade union commitment
cannot stand alone without a good trade union communication and trade
union trust.
Field of Research: Human resource management, industrial relations
1. Introduction
Trade union which consists of elected officers by the trade union members (Kallaste,
Jaakson and Eamets, 2008) is crucial in improving the terms and conditions of
employment (Knudsen, Busck and Lind, 2011; Busck, Knudsen and Lind, 2010). Trade
unions which act as the collective voice for employees are supposedly to be strong but
unfortunately are weak throughout the world (Hayter, Fashoyin and Kochan, 2011; Gollan,
2006; Kuruvilla, Das, Kwon and Kwon, 2002; Machin, 2000). Most researchers in trade
union stated that weak trade union indicate the declination in trade union’s density as well
as losing influence and power to management (Hayter, Fashoyin and Kochan, 2011; Gani,
Rose and Kumar, 2009; Charlwood and Haynes, 2008; Kuruvilla, Das, Kwon and Kwon,
2002; Machin, 2000). Weak trade union also indicates the unsatisfactory collective
bargaining agreement provision bargained by the trade unions in protecting or improving
the employees’ terms and conditions of employment that includes wages, compensation,
working hours as well as safety and health in workplace (Ghellab and Kelly, 2001; Blackett
and Sheppard, 2003; Strunk and Grissom, 2010; Clegg, 1976). Besides that, previous
research also acknowledge trade union density that refers to the ratio between actual and
potential trade union membership (Nergaard and Stokke, 2007) as the main source of
trade union’s power which indicates the strength of trade union (Kelly, 2005; Goldfield,
*Jacqueline Koh, Graduate School of Management, Universiti Putra Malaysia, Malaysia
Email : Jacqu807@sabah.uitm.edu.my
**Dr. Lailawati Mohd Salleh, Graduate School of Management, Universiti Putra Malaysia, Malaysia
Email: laila@econ.upm.edu.my
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Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
1987; Rose and Chaison, 1996). Furthermore, trade union density has been recognized
as the indicator of organised labour’s success and power (Kelly, 2005; Goldfield, 1987;
Rose and Chaison, 1996).
However, other scholars stressed that the trade union density is not the only source of
power for trade unions (Sullivan, 2010; Silver, 2003). Past research found that there is
inconsistency results between trade union density and bargaining power (Visser,2006).
For example, France showed low trade union density at 8.3 percent in 2003 (Visser,2006),
yet the trade union has a comparatively high degree of influence (Visser, 2006; Hamann
and Kelly, 2004; Lucio, 1998). Meantime, in United Kingdom (UK) the labour movement is
declining and need revitalization (Fairbrother, 2000; Fernie and Metcalf, 2005; Heery et
al., 2003) although trade union density is higher compared to France (Visser, 2006).
Therefore, trade union density alone is inadequate to enlighten the differences in labour
movement efficacy (Sullivan, 2010; Hamann and Kelly; 2004 Lucio, 1998). Past research
urged that it is essential to explore new sources of bargaining power (Silver, 2003) as well
as more effective ways of tapping the latent power of the millions of trade union members
worldwide must be sought (Sullivan, 2010).
2. Literature Review
In general, there are numerous factors that affect the trade unions’ power (Tapia, 2012).
Globally, trade unions (Hayter, Fashoyin and Kochan, 2011) particularly in developing
countries such as Malaysia (Kumar, Lucio, Rose, 2013; Parasuraman, 2007; Ramasamy,
2010) face both external and internal challenges that contribute to the declination in trade
unions’ power (Kumar, Lucio, Rose, 2013; Tapia, 2012). External challenges such as
economic and legislation factors are usually beyond the trade unions’ influence (Olney,
1997). For instance, outsourcing and subcontracting practices provide employers a choice
to relocate production to more cost effective places and provide them to choose a country
based on considerations such as labour costs, labour laws and trade union participation
(Negpen 2008). Low labour costs, flexible labour laws and inactive trade union
participation are considered in selecting countries for investment to control the trade union
movement through legislation such as in Malaysia (Wad, 2012; Kumar, Lucilo and Rose
2013). For example, Malaysian Trade Union Act, 1959 restricts a range of issues to be
included in collective bargaining such as managerial prerogatives, freedom of strike and
dispute resolution (Ministry of Human Resources, Malaysia: Trade Union Act 1959, 2012).
Besides that, the increase of non-unionised jobs and employer hostility towards trade
unions such as being reluctant to recognize trade unions (Hall, 2005) prohibits the trade
unions in protecting the members’ well-being (Tapia 2012; Hayter, Fashoyin and Kochan,
2011; Gall, 2005).
Although external challenges have great impact in shaping the trade unions’ movement,
the internal challenges within the workplace and within the trade union movement also
hinders trade unions’ movements (Kumar, Lucio, Rose, 2013; Rose, Kumar and Gani
2008). Challenges within trade unions include low level of members’ commitment to trade
union (Lévesque, Murray, and Queux, 2005), poor communication between trade union
leaders and members (Tapia, 2009), and low level of members’ trust towards the trade
union (Napathorn and Chanprateep, 2012).The absence of these three elements of
communication, commitment and trust between the trade union members and trade union
leaders can reduce the trade unions’ collective bargaining power (Johari and Ghazali,
2011; Hayter, Fashoyin and Kochan, 2011) and thus leads to poor collective bargaining
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outcomes between trade union leaders and management (Lee, 2009). Past research
stated that poor collective bargaining outcomes in turn cause employees’ unrest and
negative terms and conditions of employment (Lee, 2009).
Relationship capital concept which consists of communication, trust and commitment was
introduced by Harold Kelley (1979). This concept stresses the important role of these
three elements between a husband and a wife for a successful marriage (Kelley 1979).
Later, this concept was extended to the organizational setting such as strategic alliance
partners. Cullen, Johnson et al. (2000) described relationship capital as the quality of
relationship that exists between strategic alliance partners in the private sector. Basically,
relationship capital consists of trust and commitment that ensures that the relationship
between partners is beyond arm’s length contract which means beyond the relationship as
in the contract (Cullen, Johnson et al. 2000). Later, communication element was added in
the relationship capital concept (Sambasivan, Loke, Mohamed and Yee 2011). Majority of
the past research on communication, trust and commitment was carried out in the dyadic
manner such as relationship between communication and trust (Mueller and Lee, 2002;
Thomas, Zolin et al., 2009), trust and commitment (Jayakody and Sanjeewani 2006;
Welch and Jackson 2007), or, commitment and communication (Vuuren, Jong et al. 2007;
Bambacas and Patrickson 2008).
However, research looking at the interaction of communication, trust and commitment in a
single study is still limited (Sambasivan, Loke et al. 2011; Zeffane, Tipu et al. 2011). It is
said that communication, trust and commitment is a cyclical process: communication
which refers to a belief question of mechanics, with a focus on conveying messages
(Quirke 1996) can affect trust and commitment. Trust defined as a subjective assessment
of another’s influence in terms of the extent of one’s perceptions about the quality and
significance of another’s impact over one’s outcomes in a particular situation, such as
one’s anticipation of, openness to, and inclination toward such influence provide a sense
of control over the potential outcomes of the situation (Romano 2003) can affect
communication and commitment whereas commitment which is a psychological
connection among the employee and their organization that results in an attachment
towards the organization (Allen and Meyer 1996) can affect trust and communication
(Sambasivan, Loke et al. 2011; Zeffane, Tipu et al. 2011).
2.1 Relationship Capital in Union Setting
Research on relationship capital mostly were carried out in the organizational setting such
as between supply chain management and between various actors in the organization
including co-workers and managers at various levels of the hierarchy (Sambasivan, Loke
et al. 2011; Zeffane, Tipu et al. 2011). Hence, study in other settings such as union is
needed. Therefore, relationship capital in union setting can be described as the cyclical
interaction between communication, trust and commitment (Sambasivan, Loke et al. 2011;
Loke, Sambasivan and Downe, 2009) that occurs between the trade union leaders and
union members.
2.2 Consequences of Union Relationship Capital
Past research mentioned the importance of
relationship capital in
maintaining
relationship such as relationship between partners in a supply chain ( Sambasivan, Loke
et al. 2011; Loke, Sambasivan and Downe, 2009). It is claimed that effective relationship
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Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
capital between partners can yield positive outcomes (Othmae 1992; Sambasivan, Loke et
al. 2011; Loke, Sambasivan and Downe, 2009). Applying the relationship capital concept
in the union setting refer to the relationship between the trade union leaders and trade
union members. Effective relationship capital between trade union leaders and trade union
members can lead to effective labour-management cooperation. Furthermore, strong
relationship capital between trade union leaders and trade union members can also create
positive work environment.
Relationship between trade union leaders and trade union members is very much like a
marriage. The success of this marriage requires effective relationship capital
(communication, trust and commitment) between the partners such as between a husband
and a wife (Othmae 1992; Sambasivan, Loke, Mohamed and Yee, 2011). However,
research examining the relationship of communication, trust and commitment in a single
study is warranted (Sambasivan, Loke, Mohamed and Yee, 2011; Zeffane, Tipu and
Ryan, 2011). Hence, this study will examine the relationship of these elements in a single
study in union setting. Research in the organization context revealed the interaction
between communication, trust and commitment (relationship capital) as cyclical:
communication can affect trust and commitment; trust can affect communication and
commitment; and commitment affects trust and communication (Othmae 1992;
Sambasivan, Loke et al. 2011). Translating this concept in the union context, union
relationship capital refers to the cyclical interaction of communication, trust and
commitment between the trade union leaders and trade union members. Past research
revealed that communication plays a crucial role as a mechanism to develop the structure
of relationship within the trade union (Mohamed, Shamsudin and Johari, 2010). It is
suggested that purporting that the quality of communication between trade union leaders
and trade union members might lead to the trade union members’ trust to their trade union
leaders (Mohamed, Shamsudin and Johari, 2010).
In other words, it involves the ability of trade union leaders to communicate and
disseminate information such as company’s financial performance and management
business plan to trade union members on relevant information that can affect the trade
union members’ wellbeing (Mohamed, Shamsudin and Johari, 2010). Besides, free flow
of communication allows trade union members to express their dissatisfaction and
problems over workplace issues as well as their view of the role of trade union in solving
these issues (Mohamed, Shamsudin and Johari, 2010). Two way feedback between trade
union leaders and trade union members which includes trade union leaders’ willingness to
listen to trade union members’ problems and dissatisfaction in workplace, to take action
and to provide feedback to the trade union members (Mohamed, Shamsudin et al. 2010)
can increase the union members’ trust towards the union leaders. Past research also
revealed that accurate information, sufficient explanation for decisions and openness to
bilateral communication are characteristics conducive to the development of trust
(Whitener, Brodt et al. 1998).
Hence, trade union members’ trust towards the trade union leaders can contribute to trade
union members’ commitment. It is suggested that trade union members’ trust is greater
because they believe the trade union is reliable and capable in protecting their wellbeing
(Jones, Couch et al. 1997). It is claimed that the trade union members become more loyal
and responsible to their trade union leaders. Furthermore, trade union members become
more willing to participate the trade union activities (Gordon, Philpot et al. 1980). Besides
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Proceedings of 8th Asian Business Research Conference
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that, the trade union members’ belief in unionism also increases the trade union members’
commitment towards their trade union leaders (Gordon, Philpot et al. 1980).
Research by Sambasivan and associates (2011) on supply chain partners found that
communication, trust and commitment which are the elements of relationship capital are
inter-related. They also stressed the the important role of relationship capital between the
supply chain partners on strategic alliance outcomes. Translating this concept in union
setting, good union relationship capital between trade union leaders and members can
lead to the development of labour-management cooperation (Yarrington, Townsend and
Brown 2007). In other words, cooperative labour-management is associated with high
levels of trust, mutual commitment and effective communication between the trade union
and management in a particular organization (Yarrington, Townsend and Brown 2007). It
is said that effective relationship capital between the trade union leaders and trade union
members increase the trade union’s delivery effectiveness on the needs of their members
(Mohamed, Shamsudin and Johari, 2010). Communication such as discussion includes
the trade union leaders’ and trade union members’ shared cognition (Choi and
Menghrajani, 2011). It is said that when people come to share a common schema regarding the bargaining task, it will be easier for them to anticipate each other’s likely bargaining
decisions and the bargaining moves to which each will be receptive. Thus it would be
easier for them to decide what moves would be most feasible for reaching a settlement,
and for them to coordinate in terms of bargaining offers and responses (Schelling, 1960).
Moreover, if bargainers specifically share a common schema concerning how to reach a
bargaining agreement, then they would be more likely to anticipate that their opponents
would engage in moves that are consistent with reaching a bargaining agreement and
perceive such moves to be more feasible. Once bargainers anticipate their opponents to
make decisions that would assist in reaching an agreement or anticipate their opponents
to be more receptive to such decisions, this would promote cooperative bargaining among
bargainers (Pruitt & Kimmel, 1977). Besides that, communication enables the trade union
members to voice out their concern over workplace issues (Cooke 1989; Newton and
Shore 1992; Mohamed, Shamsudin and Johari, 2010).
Furthermore, management’s willingness to communicate and provide relevant information
such as firm’s financial performance to the trade union leaders can lead to labourmanagement cooperation (Peterson 1993; Voos, Eaton et al. 1993). Effective
communication with the trade union leaders enhance the trade union members’
knowledge on the organizational conditions (Fretz and Walsh 1998). Additionally, good
communication as practiced by management can increase the trade union’s bargaining
power on issues that has effect on the trade union members. Hence, this leads to trade
union cooperative motivational that can contribute to cooperative labour relation climate.
Cooperative labour relation climate can lead to the integrative bargaining (Walton and
McKersie 1965). It is also said that effective communication showed that management is
supportive and helpful in facilitating the trade union’s objectives in protecting the trade
union members’ interest (Angle and Perry 1986). Therefore, the employees perceive
management and trade union as fair towards them (Koys 1988). At the same time, this
enhances the employees’ commitment to the organization (Koys 1988).
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3. Summary and Conclusions
Based on the importance of relationship capital highlighted in the past research
particularly for the long term relationship between the supply chain partners (Sambasivan,
Loke et. al 2011; Loke, Sambasivan and Downe, 2009), relationship capital can also
improve and strengthen the relationship between trade union leader and trade union
members which is crucial for trade union power and survival.
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