Managing Employee Relations in Contemporary Organisations - Essay Example

Executive Summary This report examines the of employee relation systems in ACME UK Ltd. It identifies the fundamental factors that led to the successful implementation of a modern HRM unit in a company that was set up at a time that personnel management was the norm. It identifies the implications of these actions on employee relations in the organisation. The report is based on a case study which is in the form of an interview with Mr. Martin Lawrence, a Director of ACME UK. Mr. Lawrence has been in charge of the people management function of ACME UK since its inception in 1986. He, therefore, discloses a wealth of information about the history and evolution of the human resource management system of ACME and its significance to employee relations. The accounts of the case study defines the management style used by ACME. The report, therefore, analyses the management style employed and the role these new systems played in shaping up employee relations in the company. The effects of the changing contexts of employee relationships in the wider British society on ACME's HR evolution is also analysed. Introduction This report examines the people management function at ACME. It evaluates how the management of human resources at ACME began in the 1980s and how it evolved into what it has become now. In this process, there will be an analysis of the management style at ACME and the rationale behind those styles and their links to employee relations will be examined. In this analysis, the following objectives will be addressed: 1. An analysis of the changes in the management style in relation to the management of people in ACME. 2. A review of the rationale behind this change and the influence on the organisation and its influence on employee relations. 3. An evaluation of the changes in employee relations in Britain over the past thirty years in relation to the changes in the people management function of ACME. Employee Relations and the HRM Function ACME was set up in the UK in 1986. The evolution of ACME's personnel management function to human resource management had implications on the employee relations of the organisation. Personnel management and human resource management differ because human resource management emphasizes the need to look at human resource strategically (Legge, 1995). Employee relations on the other hand relates to organisational leadership and control exerted by employers over employees (Blyton and Turnbull, 2004). Employee relations is about the power dynamics that exists in the organisation which determines how employees are managed and how they want to be managed. Traditionally, the method of doing this was through four main actors: employers, employees governments and unions (Blyton and Turnbull, 2004). However, modern trends and activities have changed the actors into a stakeholder based system which means that shareholder claims and other demands are give fairly equal recognitions in organisations. In the case of ACME, it appears that employee relations was strongly affected by the centralisation of the human resource management function of the company. The consolidation of the units of an organisation which was the focus of organisations in 1986 when ACME began operations provided room for the traditional employee relation system, where the employers, employees and union could bargain and arrive at conclusions relating to management, control and incentives. However, Lawrence's new policies and systems led to a centralised human resource management system which modified employee relations in ACME. There are four main elements that make Human Resource Management unique from Personnel Management. First of all, human resource management focuses on integrating personnel with organisational goals rather than an independent department (Armstrong, 2000). Secondly, it seeks to identify the right people for the right jobs rather than the need to employ people because unemployment in the nation must cut (Kok, 2003). Thirdly, human resource management emphasizes on the importance of individual development and their continuous improvement in offering value to the company (Koster, 2007). Finally, human resource management makes the people management function a line management role rather than an independent 'department' or unit in the company (Armstrong, 2000). Lawrence successfully centralised the human resource unit of the company. This meant that the traditional employee relation system where the three main actors bargained for the welfare of the people had to be eliminated. Rather, the company sought to merge the goals of the employees with organisational goals and employ the right people for right jobs. This meant that the welfare idea or unitarianism that existed in that era had to be played down. Instead, a pluralistic system which sought to attain efficiency and higher results was put in place. This became evident when the company elected to eliminate trade unionism. Evolution of Employment Relations at ACME Kessler and Purcell (2003) identified that employment relations is based on four main things: 1. Structure: The rules – either formal or informal 2. Operations: The hierarchy, processes and style 3. Party Relationships: Methods of communication and interpersonal interactions 4. Substances: Individual rewards and collective exertion of group interests From the onset, Lawrence sought to maintain a unique human resource unit that was quite distinct from management as an independent function in the organisation. This had a serious impact on employee relations because it acted as the footprint for the evolution of the company's power dynamics. The vision of separating the management function from employee collective bargaining enabled Lawrence to set up a system that could attain the two main ends: 1. To control the consent of employees 2. To maximize profits and efficiency of employees. Legge (2005) identifies that these two items mark the evolution from the old employee relations systems (under personnel management) to the new system (under human resource management). Through this, Lawrence successfully restructured the operations, relationships and structure of the main actors of ACME. This ensured that independent political groupings of actors were eliminated. This ave the impetus for consensus in decisions relating to individual and collective requirements or expectations of the members of the organisation. Hence, the goals of the management and the employees were merged and the common goal was to attain optimum results in terms of profits and the usage of resources. In attaining this end, Lawrence set up a new recruitment system. The recruitment system sought to systematically eliminate the traditional practices of personnel recruitment where people got jobs because the government needed to cut down on unemployment. Secondly, the recruitment system sought to bring in young people who were motivated to attain results. Thirdly, older people who had preconceptions about the old employee relations system were deliberately kept out of the organisation. The management of ACME supervised the new and innovative recruitment system directly. They avoided sub-contracting to other recruitment firms which could potentially disrupt the innovative plan. Blyton & Turnbull (2005) identify that “sub-contracting can be used to accommodate not only structural and temporal instability in product markets, but also establish different levels of 'minimum efficiency scale' and respond to the structure and nature of different labour supply conditions” (p.82). In other words, outsourcing the recruitment function could potentially lead to a situation where the dominant conditions on the labour market could be invoked in the recruitment and selection. The managers of ACME kept their cards close to their chests and selected only the best people to achieve the new employee relation systems they had proposed. Elimination of Unionisation From the onset, ACME's managers sought an efficiency-oriented entity rather than one that maintained conflicts with a trade union (para C6). They, therefore, made a conscious effort to operate without a trade union. Britain had operated a tripartite trade labour relations system since the end of the Second World War to the late 1970s (Blyton and Turnbull, 2004). This involved the three main classes of actors: the employers, employees and the third parties who represented the state. Labour laws favoured a posture where there was bargaining and negotiations between these three parties. These negotiations determined rules, regulations and procedures used at the workplace. These procedures were rooted in the fact that the fragile post-war economy demanded that the state operated as a welfare state rather than a purely capitalist one. There were conflicts of interests and power relationships. Thus, the laws of Britain supported these bargaining issues. When the Thatcher administration took office, they made laws that discouraged trade unions and employment rights (Williams & Adam-Smith, 2009). ACME was set up in the early years of Thatcherism in Britain. As a Japanese owned company, the UK management were to be judged on their efficiency rather than their 'political correctness'. They, therefore, had to make an effort to remove potential bottlenecks like unionism. They, therefore, reacted by employing younger people who were not shaped by the dominant labour politics of Britain prior to Thatcherism. These youngsters were interested in efficiency and were, thus, positive candidates for ACME. Once this end was attained, the management sought to find a way of merging the individual development aspirations of the new entrants with the attainment of organisational goals. This eliminated potential conflicts that could cause the organisation to digress from its fundamental ends. Trade Unionism feeds on the divergence in interests and values of employers and employees (Salamon, 2000). Whereas employees seek to maximise their income, employers seek to maximise their profits. Thus, trade unionism uses the collective strength of workers to lobby with the government for better treatment and conditions. In my view, trade unionism is something that could lead to adversity and destructive conflicts. The new employee relations structure introduced by Lawrence clearly eliminated this adversarial feeling. This is because the absence of trade unions meant that the flex of muscles and the use of destructive conflicts could disappear. In its stead, a new employee relation system was to be established where co-operation was a priority. Conflicts were more constructive rather than a destructive show of strength and power. Management Approach & HR In most companies, the management are under pressure by the shareholders to provide short term increase in profits. On the other hand, there is the constraint of statutory protections for labour and there is the need to respect employment service contracts and cut costs (Blyton & Turnbull, 2004). This has a strong bearing on how management relates to employees in organisations. The conflict between increasing shareholders' wealth and the satisfaction of employee needs requires a blend of humanism and utilitarianism (Legge, 1995). This means that the management of an organisation will have to ensure that there is fairness and justice in treating employees whilst there is the optimisation of resources. Human resource management becomes a tool for a different form of employee relations where management focuses on the maximisation of profits and the satisfaction of employees (Legge, 2005). However, the trade unions are meant to seek the best interests of employees. In cases where they are restricted there is a tendency that management will take advantage of employees and the employees lose their rights to initiate independent initiatives (Salamon, 2000). The management of ACME had two major responsibilities. First of all, they had to resolve the conflict between employee interests and shareholder interests. Secondly, they had the responsibility to provide a system of fair negotiations in an environment where unions were non-existent. This ended up in the a pluralist approach and other methods of improving the efficiency and results of its workers. Pluralistic Approach A pluralistic approach is one where the conflicts in an organisation is solved through consensus (Blyton & Turnbull, 2004). In other words, the management attains a balance through the consideration of the views and expectations of employees, shareholders and other relevant stakeholders. This became common in Britain when it became apparent that business interactions were to be based on efficiency and individualism rather than collectivism and elements of a welfare state. The management of ACME responded by setting up an adult-adult transactional environment (L3 & L6). Employees were able to express their views and opinions to managers. These views were discussed and adjustments were made within the team . This showed mutual self respect and egalitarianism. Secondly, ACME took great care to select the best employees who were compatible with the wider team through a personalized evaluation of bio data (L8). Thus, management and workers who felt they would get into conflict with new hires had the privilege of preventing such persons from joining. Also, recommendations were common so tensions were reduced. Once ACME maintained systems that prevented friction and tensions. Flexible control and payment system as well as managing by walking around created a less intimidating environment that supported dialogue in an informal setting (L10 – 11). Variable Pay System One way of keeping the workers efficient was through the appraisal system that sought to evaluate workers monthly (E2). Also, the objective classification of employees into grades A, B and C helped to prevent friction and hostilities (H4 – 11). The pay of employees increased gradually (H1). Pay increases were tied to the prosperity of the company (N2). This enabled the employees to work hard and improve steadily. Unlike the old employee relation system where people had to be promoted as a matter of right, this system sought to award a systematic increase in employees' contribution to the organisation. This was done through a scientific method rather than an 'ought to be' negotiation system. Labour Efficiency The efficiency of workers is strongly linked to the scientific methods of management like Taylorism. ACME used these labour efficiency systems to recruit and retain only the best employees. It also encouraged employees to put up their best performances. First of all, ACME blended recommendations with advertisements to boost its pool of recruitments (D4). From this, the HR department could select only the best employees. Also, internal recruitments were used as a tool to motivate workers and also as a tool to build up experience and competency (F1 – 3) The batch production system enabled various employees to query other employees (I1). This was a quality control tool integrated into the human resource management systems. Clearly, the old system of ought-to-be evaluation and retainment of employees was eliminated in favour ofa scientific system that sought to award employees for what they actually did for the company. Productivity The staff members were encouraged to build skills and competencies outside their areas of operation. There was a general support for multi-skilling within grades (R23). Also, daily Tenko meetings ensured that employees' efforts were linked to the overall expectations of the company. This changed the party relationships of the organisations and prevented the risk of concentrating power in small groups of people which could lead to strikes and old ways of bargaining in organisations. Maintaining the HRM Systems The new system of employee relations generated co-operation and consent between employees and management through scientific methods of promoting productivity. It also sought to maintain this culture through the attainment of higher goals. Thus, instead of having an adversarial attitude, the employees of ACME had a more positive attitude towards management. Paternalistic Culture ACME maintained a paternalistic culture to ensure that its systems thrived. This is because there was a lot of informality and unwritten rules and codes. These rules were to be harnessed through the personal touch to recruitment and the communal nature of the company (D1 – 2). There were many informal structures that were strongly connected to the communal bonds of the hinterland culture within which ACME UK was located (D5 – 12). Also, the Tenko meetings and the group orientation meant that members of the teams were always kept together and bonded in everything they did (T2). Although there were little rules about the intensity of work, there was ongoing communication with teams about the sales forecasts which determined the production plan (R8). Dispute Resolution There was no strict monitoring throughout the company. ACME was run through a system of mutual respect (J1). This added to the friendliness and eliminated the need for unionisation. Cultural conflicts, like the Japanese dress-code requirement, were amicably resolved (K1). The HR department centralised the grievance procedure. It took up disputes and presented verdicts directly to the parties involved (L3). Martin Lawrence accurately points out the fact that such conflicts would have raged on if the union system was existing because every conflict was always translated destructively to the employer or employee camp and it became a destructive conflict. Managerial Hierarchy The managerial system was one where team leaders linked up with management (G1 – 3). This approach promotes friendliness and enhances leadership abilities. Management working times also varied according to work schedule. This was clearly compensated for and provided assurance that efficiency and effectiveness was always honoured. Management supported and encouraged innovation and extra effort (M4). Although the management system was not strictly written down and coded, the methods used ensured that grudges were minimized to the barest minimum. Conclusion ACME's system of human management ensured changes in employee relations systems and structures. The use of formal rules and informal conventions that were steeped in efficiency and co-operation was at odds with the norms in the welfare society of Britain in the 1980s. However, the elimination of unionism, hiring of younger and motivated people changed the terrain for employee relations in ACME. The management of ACME sought to modify the old system of actors which was employees, employers, unions and government to one in which management was central. All other related groups, including employees were in a big web of stakeholders. As such such, employee relations, like all stakeholder relations was aimed at the optimisation of resources. The optimisation of resources was done through the use of scientific and objective methods of retaining employees. Employees were improved as and where necessary through scientific mehtods. This ensured that the organisation remained productive. Also, employee-management relations were replaced with less adversarial systems. An informal structure ensured that employees could work hand-in-hand with managers to attain organisational goals rather than attain individual group interests. Read More