Global Employee Relations: Things to Know Before You Jump In

Podcast two of “the wild side” is titled “things to understand before you jump in.” Of course, the real world of global employee relations involves jumping from issue to issue or crisis to crisis in multiple countries around the world. Your job may have even been created in response to a major employee relations issue. The main purpose of these podcasts is to help you take a more strategic view; establish priorities and predict risk. But the truth remains that, if you are not able to resolve those day-to-day crises, then no-one will offer you a seat at the big table.

All that said, it might be a good idea to spend 10 minutes on a podcast that should help you make sense of a problem and find a solution to it. It’s important to understand that these offerings are not trying to teach the detail of different systems of employee relations around the world. They are trying to encourage different ways of thinking about them. What we are going to talk about today are the concepts of power versus rights; maturity; culture; and risk.

I’m Alan Wild, Senior Advisor to the HR Policy Association: the leading voice of CHROs today. You are listening to “A Walk on the Wild Side: Managing Global Employee Relations in Modern Times … 10 Minutes or So at a Time.”

A crucial question for ER practitioners is where organized labor gets its leverage. There are broadly three types of system: power-based; rights-based; and control-based. The United States, the UK, Turkey, Singapore, and India are typical of power-based systems. Organized labour earns the right to represent workers collectively by gaining majority employee support in a ballot. This results in a binary system where trade unions have full rights to bargain, or they have nothing.

In the power-based system, the difference between being “union” or “non-union” maters a lot. And, given a choice, most companies would prefer what they call a direct relationship with their employees over pay and working conditions. You could say that the difference 2 between “union” and “non-union” is like “night and day.” Power based countries are stable at either end of the spectrum. At one end, those with established unions and bargaining rights that are stable other than at times when the CBA is up for renewal. At the other, those with no unions are stable unless and until they get into a claim for recognition that disrupts the workplace with a contested ballot.

The rights-based system gives power to trade unions and works councils through the legal right to represent workers, irrespective of membership. Eight of the 27 European Union countries have powerful works council systems and the others have very low thresholds, as few as three union members, to secure rights to bargain. Whilst the unions and works councils have rights to represent employees under the law, additional leverage comes from employee willingness to support them. Rather than “night and day,” the difference between union and non-union works councils is more “afternoon and early evening.”

In the binary system the question is do we or do we not have a bargaining table. In the rights-based system, the question is not whether there is a table but more who sits around it. Where organized labour has power independent of employee support, building sustainable relationships with representative organizations is critical. We’ll look in way more detail at the dynamics of works councils in a dedicated episode.

A variant of the right based system is in those countries, a number of them in Southern Europe and Latin America, with sectoral bargaining. With the renewed interest around the world in sectoral bargaining, again we’ll talk about that another time. I mentioned three systems, the final one is control-based and is typical of countries like China, the Middle East and much of Africa where the employee relations system is controlled by the government. Trade unions in China are a part of the system of worker control, whilst in other countries they are potential threats to political stability of the current regime and need to be kept on a short leash. One final word before we move on. In non-union companies in the power-based system, employee disinterest in trade unions is a good thing. In the rights-based system, where few people vote in works council or trade union elections this allows militant factions to gain control of powerful committees. The issue of what I call “activist capture” is something we’ll return to.

A few words now on maturity. As with many things in life, including us as individuals,  maturity tends to correlate with stability and predictability, and immaturity with instability and surprises. In employee relations, as well as in people, we get the occasional mid-life crisis, but by and large the hypothesis holds true. Mature countries are typically those that dominated world trade before the 1990s: the US, Canada, the countries of western Europe, and Japan. They tend to have a long history of employee relations management, well organized trade unions and a reliable legal system. Fundamentally there are clear formal and informal rules of behaviour and both sides of the fence by and large trust them. Problems are easier to anticipate, escalation is slow and predictable and there are rules around strike or protest action.

The new economies that have emerged over the last 30 years tend to exhibit the characteristics of immaturity. HR is not a well-established discipline and until recently was associated with record keeping. Trade unions have little experience, are not well-funded and have a distorted image of a company’s ability pay, particularly foreign-owned companies. The legal system is not generally trusted, and cases become stuck in courts, sometimes for years. Union power is based on their ability to hurt the company and disputes often arise and escalate quickly as employees are unable to afford protracted disputes. Brazil, India, China, almost all of Africa and Chile are good examples.

In immature countries, listening and responding to issues quickly is important. If people do not trust the legal system, then companies should build internal problem resolution machinery they do trust. Trade union representatives often have little experience or training. Companies should consider training them to become the representatives they would like to deal with.

The business guru Peter Drucker famously said, “culture eats strategy for breakfast.” The same is true of employee relations. Countries with similar looking laws and data on trade union membership and bargaining coverage often behave very differently on the ground. A good example would be the United States and Japan. If you get time look up a YouTube video called “American Game Japanese rules,” based around baseball - the national sport in both countries. It’s old but still a valuable.

For an in-depth study of the influence of national culture on bargaining styles, look out for Erin Meyer. You will find her in the Harvard business review, on YouTube and TED and in her book. The work to look for first is titled “Getting to Si, Ja, Oui, Hai and Da”. The three[1]minute you tube version is fantastic. Meyer plots national approaches to bargaining based on two axes. The first is “confrontational” to “avoids confrontation”. The second axis is “emotionally expressive” to “emotionally inexpressive”. The Japanese culture combines inexpressive behaviours with conflict avoidance. The Dutch and French on the other hand are more confrontational. The Dutch however are much less emotionally expressive than the French. I hope that whets your appetite to read or listen to Erin’s work.

The final concept to bear in mind is that of risk. We will take an entire episode looking at predicting, assessing and managing risk, and this is core to the employee relations function. I just want to talk here about one aspect of employee relations risk and that is internal or external risk. Put simply, external risk is the risk that comes with being in a certain country. Every company working in Argentina shares a similar and high risk. Likewise, every company working in the Republic of Ireland shares a similarly low level of employee relations risk. External risk is influenced by things like political stability and inflation. In the short term the company can do little to influence this risk … other than decide whether or not to do business there. Internal risk comes from the things a company can control. Examples are pay to market, supervisory experience and line manager to employee ratios. IBM, for example, identifies 12 external risk factors and 13 internal ones. Internal risk is important because it is something the company can influence in the short term.

Four things to keep in mind, power and rights, maturity, culture and risk when problems present themselves and you design solutions.

I’m Alan Wild and you have been listening to “a walk on the wild side.”