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Contextualising Contemporary Developments in Employment Relations
Contextualising Contemporary Developments in
Employment Relations
Site:
ICS Learn | Student Community
Course:
Contemporary Developments in Employment Relations (R53-5DEROLG2)
Book:
Contextualising Contemporary Developments in Employment Relations
Printed by: ISLAM NAZIER ABDELMALAK TANAS
Date:
Monday, 25 November 2019, 12:20 PM
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Table of contents
1. Introduction
1.1. The ‘Employment Relationship’
1.2. Power
1.3. The best film ever about employee relations
1.4. Progress Check 1
1.5. Summary
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1. Introduction
In studying this unit you will have two primary resources. The first is this learning material. The second is your eTextbook. You will be directed to
read specific chapters of the eTextbook as we work through the unit. The eTextbook that you have been provided with to accompany this unit is:
Taylor, S and Woodhams, C (Eds)(2012) Managing People and Organisations, 1st edition, CIPD Publishing
From time to time there will be activities in your learning material. Please complete these, as well as completing the tasks that are set out in your
eTextbook. These will ensure that your learning experience is thorough and complete.
Reading
Take time now to read Chapter 5, Contemporary Developments in Employee Relations, from your Managing People and Organisations eTextbook
which is a useful introduction to all that is covered in this module.
Print this book
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1.1. The ‘Employment Relationship’
It is probably logical that we start our exploration of the topic of employment relationships by trying to understand what the employment
relationship is. Although it might seem like a relatively obvious concept, it is actually difficult to give an accurate definition.
One of the difficulties is understanding who the relationship is between. In a large organisation the employee might never meet the most senior
person in the organisation, and hence it is difficult to conclude that the employee is having an employment relationship with senior management.
However, the relationship between the employee and the line manager might be very remote from the employment relationship that the senior
manager might want within the organisation.
In a large organisation one of the big challenges is ensuring that the values of the organisation are communicated at all levels. It is also difficult for
the senior management to ensure that their preferred approach to managing people is used by all line managers. Hence, there might be negative
employment relationships – not because of the values and approach of the organisation, but because of the values and approach of individual line
managers. These difficulties with specifying the employment relationship lead to difficulties with defining the employment relationship.
One of the first definitions to be put forward was that of unitarism (Fox 1966):
Unitarism
The key message of this definition is that there is harmony between the employer and the employee, which comes from having a common purpose
to work towards. The theory presumes that there is effective teamwork, and there is one single source of authority, which is management. As
everyone, management and employees, are working towards the same goals, there is harmony and conflict does not occur. The definition presumes
that conflict will only occur if there is a problem in communication, or if there is a troublemaker who is stirring up problems. In this definition there
is no need for a trade union, because there is harmony and no conflicts will need to be resolved.
The main difficulty with this definition is the presumption that the employer and employees will have the same goal. Although it could possibly be
correct that both the employer and employee want the success of the organisation (or neither will have a job), it is not certain that the way that they
want to achieve that success is the same. The employee might not be prepared to make certain sacrifices, even if that means that there is a
possibility of the organisation failing.
Let us think about the examples of British Airways and JCB. Both these organisations have hit the news due to difficulties that they have
experienced.
JCB supply mechanical equipment, and a large area of their business is in the construction industry. Inevitably, the construction industry was badly
hit by the recession and hence demand for products from JCB fell. In 2008/9 JCB agreed a series of measures with its employees to address the fall
of profits. It agreed a pay cut for all employees, as all worked together to avoid mass redundancies (although there were some job losses).
British Airways is an organisation that is well known to the observer of conflict. Over recent years it has had a number of conflicts, with 2009/10
bringing one of the most long-lasting. In summary (and the details are much more complex than this summary), BA was experiencing the worst
losses of its history. To cut costs it wanted to reduce the number of cabin crew on long-haul flights by one, and also wanted to curb some of the
allowances that cabin crew are entitled to. In response, after long negotiations, BA cabin crew rejected the offer and took industrial action.
In JCB we could argue that there is some element of unitarism (although we have to be tentative in our arguments, because we do not know the full
details of what happened within the organisation). There seemed to be a common aim of ensuring that the organisation survived, and pay cuts were
achieved without conflict, from what we know.
However, in British Airways, there was a different approach. We can presume that both the employer and the employee want the organisation to
survive, but there was not harmony in achieving this common goal. There could be a variety of reasons for this:
A lack of trust – there has been a long series of conflicts between trade unions and British Airways, and it could be that there was not
sufficient trust in the employment relationship.
(Trust is an interesting issue here. In JCB, employees were told that, once the economic situation improved, they would try to give jobs back to
employees who had been made redundant and they would restore pay to the levels it was before the cuts. They have now done that, and this
will increase the trust in them for the future).
Miscommunication. As we noted, those putting forward the definition of unitarism argue that the only reason that conflict might occur is if
there is poor communication or a troublemaker. It is possible that there was conflicting information presented to BA staff and hence they were
not clear about the difficulties that the organisation was really facing.
Troublemaker. Maybe this is a controversial view, but I guess that some of the senior management within BA would see the trade union
representatives as troublemakers, and being reluctant to agree to any changes that are needed.
The definition has a number of weaknesses. It cannot be presumed that the objectives of the employer and employee are identical, because they will
have different motivations. It is also not possible to presume that there will be no conflict – indeed, many would argue that some conflict is a
healthy thing. Another weakness is that the definition presumes that the employer is making the right decision, and this is not always the case.
Pluralism
The definition of pluralism developed to address some of the weaknesses in the unitarism definition.
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Pluralism sees an organisation consisting of lots of different groups. Each of these groups has a different interest, and there is a central group which
tries to pull all these groups together to meet a common goal.
This model, as Halsey (1995) noted, tries to address some of the changes in the organisation that had occurred post-Second World War. Maybe it is
true that unitarism did define the employment relationship at one stage in history. However, the pluralism definition acknowledges that employees
and the employer might have different interests, and that conflict might occur. The role of senior management is to address these differences and to
try to pull the different groups together.
Maybe this is a better explanation of what happened in British Airways. Here, there were a number of groups of employees that had different
concerns. The concerns that sparked the vote for industrial action that we have been thinking about related to the stewards and stewardesses. Earlier
in 2009 there had been concerns from pilots about new contracts that were being suggested. Back in 2004 there was conflict with baggage handlers
when employees from Gate Gourmet (the provider of meals on airlines, which used to be part of BA) were dismissed. Each of these groups has
concerns, but they are different concerns and relate specifically to their area of work.
The pluralism definition would suggest that it is the requirement of the senior management to address these different concerns, and to enthuse each
of these groups about the values and aims of the organisation. The difficulty with this definition is that, in reality, it can be very difficult to keep a
number of different groups aligned – just as British Airways has discovered.
Psychological Contract
An important concept in employment relations, that goes some way to explain the difference in approaches of the employer and employee, is the
psychological contract.
The psychological contract was first described by Schein in 1965. The psychological contract is the unwritten expectations of both the employer
and the employee. Schein suggests that employees have three different kinds of expectations:
1. The need to be treated fairly
2. Some level of security and certainty
3. A need for fulfilment, satisfaction and progression.
On the other side of the psychological contract the employer also has expectations, such as the expectation of loyalty, hard work and commitment.
Many researchers have carried out further work on the psychological contract, and many see it as key to the employment relationship. If those
unwritten expectations are not met then one, or both, of the parties will experience a level of dissatisfaction with the employment relationship. If
the relationship becomes a negative relationship, there are all sort of destructive impacts on performance at work.
The issues that impact on the psychological contract are not always under the full control of the employer or the employee. For example, if we look
back at the British Airways example, the losses that the airline was experiencing were not fully under their control. The recession, the emergence of
budget airlines and the drop in flying due to environmental and terrorist concerns are things that British Airways can do very little about. Indeed,
JCB could do very little about their drop in profits due to the recession. External factors are constantly impacting on organisations, and these impact
on their ability to meet the unwritten expectations in the psychological contract.
Activity 1
Identify another conflict that you are aware of in the world of work. Try to apply some of the theory that we have just covered to understanding the
situation that you have identified.
Record my answers in my Blog
Reveal answer
I thought about the issues that there have been in the Royal Mail. Here, there have been a series of conflicts – in some ways quite
similar to British Airways. One of the overriding concerns amongst Royal Mail employees is job security. People are using the post
less, as they turn to e-mail, texting, etc. Hence, the work of the Royal Mail is declining or changing. This leads to concerns about job
security – one of the basic principles of the psychological contract. I wonder if a breach of the psychological contract underpins a lot
of what is happening in the Royal Mail.
In 2008 the UK (and much of the world) entered a deep recession, and we can see a wide range of impacts that this has had on the employment
relationship. Of course, in many cases the impact will have been the severance of the relationship – but there is also an impact on those who are not
made redundant.
For example, there was the impact on pay and bonuses. This has been particularly well reported in relation to bonuses of bankers. The Royal Bank
of Scotland and Lloyds TSB would both have collapsed without significant amounts of government money being put into the banks. However, at
the end of 2009, it was revealed that the banks still paid significant bonuses to their employees.
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This is a complicated issue. The argument against paying the bonuses says that the organisations have only survived (and hence the bankers
concerned only have jobs) because of taxpayers’ money being put into the banks. Hence, there should be no bonuses because the bankers do not
deserve it. Once they have managed to pay back the taxpayers then bonuses can be reconsidered. There is also the frustration that a number of
practices that caused the near -collapse of these two banks were carried out by the high-earning bankers – so surely they have to be ‘punished’ in
some way.
The argument for paying the bonuses says that there is a right to a bonus if targets have been met. Despite the bigger picture of the near-collapse of
the banks, individual bankers are still meeting targets. If they do this then they should receive bonuses. In addition, there is the concern that good
employees will leave the banks if they do not receive the reward they expect – and the banks need all the good employees possible at present.
Indeed, it is reported that 70 senior bankers with RBS resigned in Singapore in October 2009.
One response of the UK government was to announce a tax on bankers’ bonuses over £25,000 (to be paid by banks rather than the individuals) in
2009/10.
Another response has come at a European level, with the decision to cap bankers’ bonuses so that they are no more than their annual salary (this has
been in place since 2014). If shareholders agree, it is possible to increase the bonus level. The UK did not support this proposal, and mounted a
legal challenge against it, which was eventually dropped. The reason for the challenge comes back to the dilemma we have already considered.
Banks need to be able to recruit the best bankers. There was concern that the really talented would move to centres such as New York (where the
cap would not apply) if their bonuses were reduced. In reality, this has not happened because the banks have simply been more creative in the way
that they have paid bonuses.
An interesting summary of the debate can be found at :
http://www.bbc.co.uk/news/business-25744955
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1.2. Power
Part of what we are seeing in the difficult dilemma over bankers’ bonuses is the tussle over power. The employer has power in the employment
relationship – ultimately, in this situation, the employer can say that it simply will not pay the bonuses. However, the employee also has significant
power, because ultimately they will just resign and go to work elsewhere (presuming that jobs are available).
What we see is a tussle for power, which is impacted by the economic and psychological contract. Economically there is a strong argument not to
pay the bonuses. However, if the employer wants to preserve the psychological contract ,bonuses must be paid.
Management is typically seen as having power in the employment relationship. One of the early pieces of research into power was carried out by
French and Raven.
French and Raven (1958) suggested that there are five main bases of power:
Expert power – when the manager has special knowledge or expertise
Reward power – when the manager has the ability to give rewards
Legitimate power – based on authority and hierarchy
Referent power – when the manager is seen as particularly attractive to follow
Coercive power – based on fear.
When we look at difficulties within the employment relationship, problems on the management side are often associated with the misuse of power.
This is particularly true if the main base of power that is used is coercive or based on the giving or withdrawal of rewards.
However, there is also an acknowledgement that there is a legitimacy in power – management have authority (legitimate power) and it is generally
accepted that there has to be someone in charge making decisions.
More recent work on power has been carried out by Bachrach and Baratz (1970). They also identified five bases of power:
Force – power is exercised through removing choice, where those affected are aware of this action and its originator
Manipulation – in this situation power is also exercised through removing choice, but those affected are not aware that the choice has been
removed and are not aware who has done this
Coercion – there is the threat of sanctions if there is non-compliance
Influence – power is exercised without implying any threats
Authority – any instruction is recognised as being based on legitimacy and procedural reasonableness and hence is accepted.
Power is not necessarily a bad thing. Indeed, it can be argued that an organisation that has management without power will be directionless. It is not
so much that power is bad, but that the misuse of power is bad and will result in conflict.
Some organisations have tried to remove the outward trappings of power, to make the differences between management and employees less
obvious. They have done this for a number of reasons, and one is to remove the abuse of power. WL Gore have taken this to quite an extreme level
in giving all employees the same job title – that of Associate. There are no outward symbols of management, with the aim of ensuring teamwork
and harmony.
In understanding the employment relationship, therefore, we cannot ignore what is happening in the wider environment. Indeed, the events in the
external environment can have a significant impact on the crucial psychological contract.
For example, think of an organisation that is very aware of all the current thinking on HR practice, and is very caring and considerate towards
employees. You would expect the employees within that organisation to have very positive relationships with the employer. However, if that
organisation is struggling financially, it might not be able to pay employees a salary increase this year. This might damage the unwritten expectation
in the psychological contract of receiving a fair reward for the effort that is being put in. Hence, it might lead to poor employment relationships.
This would be a very good example of the effect the external factors can have on the employment relationship.
One easy way of looking at the types of impacts in the external environment is to group them using the PESTLE analysis. These groupings are:
Political – political parties make decisions that impact on employment. Some of these are directly linked, such as changes relating to employment
legislation. Others are indirect, such as the decision to remove the monopoly on mail delivery and the impact that this has had on employees of the
Royal Mail.
Economic – earlier we looked at Heriot’s (1995) summary of the changing psychological contract. One of the things we can see is how
expectations have changed during the recession. If the economy is in recession then many organisations will struggle and this will impact on their
ability to reward employees financially or even maintain the employment relationship.
Social – organisations operate within a society, and changes within that society can impact on them. For example, there have been high
unemployment rates in society and that has an impact on how employees who are in employment view their employer.
Technological – all the time we see advances in technology. Maybe the most significant for the workplace in recent times has been the ability to
work remotely – using computers, mobile phones, handheld e-mail devices, etc. All this impacts on the way that work is managed.
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Legal – the law is constantly changing, and employment law is probably the fastest-growing area of change. Each time the law changes
organisations have to adapt their procedures and policies to meet the new requirements.
Ethical/environmental – this is an area that has become much more significant over recent years. As a society the UK is becoming more aware of
environmental issues, and employees are increasingly concerned to work for an employer who takes both an ethical and an environmentally
friendly approach to its work.
Activity 2
Go back to the example that you thought of in Activity 1. How much is the situation that you identified there being impacted by the external
environment?
Record my answers in my Blog
Reveal answer
Significantly! The Royal Mail has been impacted by political decisions – the decision to remove the monopoly on mail delivery, the
decision to part-privatise it – and by the economy (it has lost some larger contracts for delivery due to cost). It has also suffered due to
changes in society, with people using the letter less and less as a means of communication.
The Royal Mail has also suffered from the bad press that it has received as it has entered into different periods of industrial action.
On the plus side, people are using Internet shopping more and more, and a certain amount of the delivery of purchased items does get
handled by the Royal Mail.
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1.3. The best lm ever about employee relations
It is always interesting to share opinions with your fellow students on relevant items.
Watch the best film ever about employee relations:
When Britain Went to War
Post your comments on the When Britain Went To War Discussion Forum.
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1.4. Progress Check 1
Questions:
1. What is unitarism?
2. What is pluralism?
3. What is the psychological contract?
4. What are the five bases of power according to French and Raven?
5. What are the five bases of power according to Bachrach and Baratz (1970)?
Record my answers in my Blog
Reveal answer
Answer 1:
The key message of this definition is that there is harmony between the employer and the employee, which comes from having a
common purpose to work towards. The theory presumes that there is effective teamwork, and that there is one single source of
authority, which is management.
Answer 2:
Pluralism sees an organisation as consisting of lots of different groups. Each of these groups has a different interest, and there is a
central group which tries to pull all these groups together to meet a common goal.
Answer 3:
The psychological contract is the unwritten expectations of both the employer and the employee.
Answer 4:
Expert power – when the manager has special knowledge or expertise
Reward power – when the manager has the ability to give rewards
Legitimate power – based on authority and hierarchy
Referent power – when the manager is seen as particularly attractive to follow
Coercive power – based on fear.
Answer 5:
Force – power is exercised through removing choice, where those affected are aware of this action and its originator
Manipulation – in this situation power is also exercised through removing choice, but those affected are not aware that the choice
has been removed and are not aware who has done this
Coercion – there is the threat of sanctions if there is non-compliance
Influence – power is exercised without implying any threats
Authority – any instruction is recognised as being based on legitimacy and procedural reasonableness and hence is accepted.
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1.5. Summary
We have started this unit by trying to gain more understanding of the context for employment relationships. We have looked at some different
theoretical definitions of the relationship, and have also thought about the various external factors that can impact on the relationship.
We will now move on to think about the trends and issues in the workplace today which are impacting on the employment relationship.
Reset user tour on this page
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