Chapter 14 – Building Positive Employee Relations

Introduction to the Chapter

While traditional areas like recruitment, training, compensation, and performance appraisal are
considered core aspects of human resource management (HRM), employees today expect more
from their employers. Beyond transactional expectations, they desire fair treatment, a safe and
positive work environment, and ethical behavior from both management and coworkers. This
chapter introduces the foundational elements required to build and sustain positive employee
relations, including fair treatment, ethical behavior, effective discipline management, and fostering
employee engagement to become one of the best places to work.

The chapter begins by setting the context with a real-life example involving a strike by more than
4,000 temporary workers at Tata Motors in Jamshedpur. The primary issue was a wage disparity
between permanent and non-permanent workers for a specific period. The conflict led to a
significant production loss and was eventually resolved through dialogue between the union and
management. This illustrates the importance of effective employee relations in organizational
success.

What is Employee Relations?

Employee relations (ER) refers to the managerial activity of establishing and maintaining positive
relationships between employees and employers that contribute to satisfactory productivity,
motivation, morale, and discipline, while fostering a cohesive and productive work environment. In
contexts where trade unions are involved, the term industrial relations (IR) is often used
interchangeably with employee relations.

Organizations that appear consistently on “Best Companies to Work For” lists often have superior
employee relations. Examples include Ujjivan Small Finance Bank, Godrej Consumer Products,
Lemon Tree Hotels, and The Oberoi Group. Conversely, companies that face frequent labor disputes
or negative press often lack robust employee relations strategies.

HR professionals are typically responsible for managing employee relations. The subject is taught as
a part of MBA and HRM courses, though recent trends in India show a declining academic focus on
this topic.

Positive employee relations can be fostered through measures such as effective training, fair
performance appraisals, and competitive compensation packages. Cooperation between trade
unions and management is also vital. Some companies like Bajaj Auto, Thermax, and Bosch in Pune
are known for their positive union-management partnerships. Cochin Shipyard Limited is a public
sector example where employee relations are maintained through ongoing dialogue, even during
contentious issues like Initial Public Offerings (IPOs).

Employee Relations Programs for Building and Maintaining Positive Relations

To institutionalize good employee relations, organizations often implement dedicated employee

relations programs, which may include:

1. Fair treatment programs

 2. Employee communication programs

3. Employee recognition and relations initiatives

4. Fair and transparent disciplinary systems

Ensuring Fair Treatment

Fair treatment is critical to healthy employee relations. Employees who perceive treatment as unfair
often experience demoralization, stress, distrust, reduced job satisfaction, and deteriorating
performance. Supervisors who engage in abusive behavior may increase employee turnover and
reduce job satisfaction and well-being among their teams. The negative consequences of unfair
treatment extend beyond the individual and can affect bystanders as well. Even witnessing unfair
treatment can induce psychological stress and promote unethical behavior in others.

Fair treatment is defined by concrete actions such as treating employees with respect and ensuring
equitable handling of all matters. Organizations must not only enforce these standards but also
ensure that such perceptions are held broadly across the workforce.

The reasons for ensuring fair treatment include:

 The Golden Rule (treat others as you would like to be treated).

 Prevention of counterproductive behaviors such as theft, sabotage, and deviance by

employees who feel mistreated.

 Avoiding negative personal consequences for employees, including health problems,

psychological issues, and family conflicts.

 Promoting organizational citizenship behaviors and enhancing employee commitment and

satisfaction.

Research supports the significant impact of fair treatment on employee behavior and morale. One
study measured procedural and distributive justice perceptions among college instructors.
Procedural justice refers to fairness in processes, while distributive justice refers to fairness in
outcomes. The results demonstrated that higher perceptions of both were associated with more
positive attitudes and fewer complaints.

Managers and HR professionals are responsible for ensuring fairness through a variety of techniques.
These include:

 Hiring competent and emotionally intelligent managers.

 Creating and enforcing equitable pay systems.

 Designing fair performance appraisal systems.

 Instituting organizational policies that mandate fairness across all roles and hierarchies.

Communication and appeals systems (discussed later in the chapter) also contribute to reducing
perceived unfairness.

Bullying and Victimization in the Workplace

Workplace bullying is one of the most obvious and harmful forms of unfair treatment. It involves
singling out individuals to harass, intimidate, or mistreat them repeatedly and systematically.
According to the U.S. government’s official definition (from www.stopbullying.gov), bullying
generally involves three distinct characteristics:

1. Imbalance of Power – The perpetrator uses a real or perceived power advantage to

dominate or control the victim.

2. Intent to Cause Harm – The actions are deliberate and designed to hurt the target
emotionally, socially, or physically.

3. Repetition – Bullying isn’t a one-time event; it’s a recurring pattern of mistreatment by the
same individual(s) toward the same person.

Bullying can manifest in many ways, including:

 Verbal abuse: Name-calling, teasing, insults.

 Social manipulation: Spreading rumors, exclusion from groups, breaking friendships.

 Physical aggression: Hitting, pushing, physical threats.

 Cyberbullying: Using digital platforms such as emails, social media, or texting to harass or
intimidate.

In the Indian context, bullying is a significant problem. One study involving 1,036 IT and ITES
professionals from six cities found that 44.3% had experienced bullying, while 19.7% had endured
moderate to severe bullying. Another study across various sectors reported that 46% of surveyed
employees experienced bullying either occasionally or frequently. Superiors were most frequently
identified as the source of the abuse.

Victims of bullying often respond by choosing to exit the workplace. However, this does not resolve
the psychological effects, which may include feelings of defeat, victimization, depression, anxiety,
and low performance in future roles. Some people are more vulnerable to being targeted. These
include:
  Submissive victims – individuals who appear anxious, reserved, quiet, or overly sensitive.

 Provocative victims – individuals who exhibit confrontational or aggressive behaviors that

might incite retaliation.

 Low self-determination individuals – people who rely on others for decisions and direction,
often making them easy targets.

Interestingly, even high-performing employees can become victims due to workplace envy.
Organizations can address this by building team cohesion through team-building training, social
events, and constructive interteam competitions to reduce envy and internal rivalries.

Improving Employee Relations Through Communications Programs

Effective communication between management and employees is a cornerstone of positive

employee relations. Many organizations adopt comprehensive communication programs to ensure
that employees feel informed, respected, and heard.

When employees are “kept in the loop,” they tend to feel more valued, more committed, and more
positive about their workplace. For example, some universities use strategies such as:

 Open-door policies to allow easy, informal communication with managers.

 Employee handbooks that provide detailed information on employment policies,

procedures, and benefits.

 Websites, emails, and printed memoranda to share updates, policies, or news.

Two-way communication is critical—not just for sharing information but also for listening to
employee concerns. Management must actively solicit feedback to prevent problems from
escalating. Common methods include:

 Employee focus groups: Small, interactive groups discussing specific issues.

 Ombudsman programs: Neutral parties who listen to employee concerns confidentially.

 Suggestion boxes and hotlines: Physical or digital platforms for employees to share
concerns anonymously.

 Exit interviews: Conducted when employees leave to understand their experience and
reasons for departure.

 Management by walking around (MBWA): Informal approach where managers regularly

engage with employees at their workstations to foster open communication.

Organizational Climate Surveys

Another tool for measuring and improving employee relations is the use of organizational climate
surveys. These surveys aim to assess employees’ shared perceptions of the workplace environment
and culture. Common topics covered include:

 Leadership quality
  Workplace safety

 Fairness and justice

 Pay satisfaction

 Role clarity

 Ethical practices

 Political behaviors

 Recognition and rewards

Although terms like attitude surveys, morale surveys, and climate surveys are sometimes used
interchangeably, they all focus on gauging the overall employee experience.

Several platforms provide tools for conducting such surveys, including:

 Know Your Company (knowyourcompany.com) – Focuses on direct and honest

communication.

 Google’s “Googlegeist” survey – Evaluates engagement markers like willingness to stay and
career satisfaction.

 SHRM sample surveys – Use 1-to-5 scales to measure satisfaction levels with job elements
and leadership.

The results from these surveys help HR and leadership pinpoint problem areas and opportunities for
improving employee relations.

Developing Employee Recognition and Relations Programs

Recognition and award programs go beyond financial compensation to boost morale and create a
culture of appreciation. These programs can take several forms, including:

 Formal award events (e.g., employee of the month, safety awards, tenure milestones)

 Public ceremonies or dinners to announce and honor recipients

 Customized awards for achievements such as cost savings, customer service excellence, or
innovation

Examples from Indian companies:

 Bank of Baroda and Eureka Forbes have created formal recognition initiatives for their
branch and field staff.

 Murray Supply Co. hosts award ceremonies recognizing achievements in safety, tenure, and
branch performance.

Implementation of such programs requires detailed planning, including:

 Establishing award criteria (e.g., length of service, performance targets)

 Selecting appropriate rewards

  Budget allocation

 Monitoring and evaluation of program success

 Ceremony or delivery method for the awards

Using Employee Involvement Programs

Involving employees in company decisions fosters a sense of ownership and strengthens

relationships with the organization. Employers encourage employee involvement through various
methods:

 Focus groups: Employees gather to provide feedback on specific questions or initiatives.

 Management committees: Employees help run functional areas such as the canteen, sports,
transport, or cultural events.

 Union involvement: In unionized settings, unions can help select employee representatives
for participatory processes.

Digital and social media are also used to increase involvement:

 Pinterest-style platforms enable visual sharing and communication.

 Social networks allow sharing celebrations, virtual meetings, and live streams.

 Godrej Group uses digital tools to connect employees across geographies.

 Some firms set clear policies to regulate personal use of social media during work hours.
For example, Air India has warned against negative online postings by employees or ex-
employees.

Using Employee Involvement Teams

Another way to foster positive employee relations is through employee involvement teams. These
teams help enhance productivity and innovation by enabling employees to take an active role in
solving workplace problems and contributing ideas. There are several types of such teams:

Suggestion Teams

Suggestion teams are temporary groups formed to address specific analytical problems. The team
members are often chosen for their expertise or experience and are assigned to investigate issues
such as cost reduction, productivity improvement, or quality enhancement. Their ideas can then be
submitted through suggestion systems (discussed later) and implemented with management
approval.

An example from the airline industry involved segmenting staff (e.g., baggage handlers, ground
crew) into teams that used online platforms to brainstorm and vote on improvement ideas
collaboratively.

Problem-Solving Teams

Problem-solving teams are typically semi-permanent and consist of 5 to 8 employees from the same
work area. The team is led by a supervisor and meets regularly to analyze work processes, identify
inefficiencies, and develop actionable solutions to problems. Their ongoing role makes them
essential to continuous improvement in operations and workplace systems.

Quality Circles (QCs)

A quality circle is a formal problem-solving team composed of 6 to 12 trained employees who meet
regularly—usually weekly—to address and resolve work-area issues. Members are trained in
problem-analysis techniques, including basic statistics, to help in diagnosing and solving problems
systematically.

In India, quality circles are especially popular in manufacturing industries. Companies such as
Maruti Suzuki, Honeywell, and BHEL have strong quality circle movements. Even government
institutions like Indira Gandhi Government Medical College and Hospital (IGGMCH) have used
quality circles to tackle routine administrative issues, improve service delivery, and boost staff
participation.

Self-Managing/Self-Directed Work Teams

A self-managing or self-directed work team is a small group of 8 to 10 employees who are carefully
selected, trained, and empowered to manage their tasks independently, with minimal or no
supervision. These teams are typically formed to carry out specific tasks or missions, such as
assembling a car dashboard or processing insurance claims.

A leading example of this is GE’s aircraft engine plant in Durham, North Carolina, which operates
entirely through self-managing teams. These teams:

 Train one another

 Formulate and monitor their own budgets

 Make investment proposals

 Handle quality control and inspections

 Develop performance standards

 Improve internal processes

 Prototype new products

These teams have full autonomy, and their performance is evaluated collectively rather than
individually.

Using Suggestion Systems

Employee suggestion systems are structured programs that collect, evaluate, and implement
employee ideas to improve various aspects of the organization. When designed and executed
effectively, these programs offer several benefits:

 Cost savings from process improvements

 Higher employee engagement and morale due to involvement

 Operational improvements in safety, quality, efficiency, and customer satisfaction

A study involving 47 companies reported savings of over $624 million in one year from more than
250,000 employee suggestions, of which 93,000 were implemented.

In India, Maruti Suzuki India Limited (MSIL) reported saving ₹281 crore in 2015–16 through its
suggestion scheme. Employee suggestions targeted areas like safety, productivity, process
simplification, energy conservation, and cost efficiency.

Improving Performance: HR as a Profit Center – Lockheed Martin Case

A Lockheed Martin unit in Oswego, New York, implemented a suggestion program called Cost-
Effectiveness Plus. Employees could submit ideas electronically, which were then reviewed by a
local manager and the program coordinator, and approved if valuable.

The result? Each approved idea saved the facility about $77,000, leading to total annual savings of
more than $100 million.

Modern suggestion systems go far beyond traditional “suggestion boxes” and rely on:

 Senior management support

 Simple and accessible submission methods

 Robust evaluation and implementation processes

 Active internal communication

 Alignment with organizational goals

These features ensure the suggestion program is credible, sustainable, and impactful.

The Ethical Organization

What Is Meant by Ethical Behavior?

Ethics refers to principles of conduct that govern individuals and groups in deciding what is right and
wrong. It encompasses moral judgment and guides behavior in both personal and professional
settings.

While seemingly philosophical, ethics is practical and essential in the workplace. It underpins trust—
without which business transactions, management credibility, and employee relations quickly
deteriorate. For example:

 A manager who promises but doesn’t deliver raises undermines employee trust.

 A salesperson who lies to clients ruins the company’s reputation.

 An HR manager who accepts kickbacks when hiring is committing fraud.

Beyond trust, ethics is critical to employee relations. A company cannot be truly respected or
admired unless it operates ethically.

According to a survey, 6 out of the 10 most serious workplace ethical issues relate directly to HR
practices—including:
  Workplace safety

 Employee record security

 Employee theft

 Affirmative action

 Comparable work

 Privacy rights

Ethics vs. Morality

While often used interchangeably, morality refers to society’s accepted standards of right and
wrong, such as not stealing or not harming others. Ethics is the study or application of those
principles in real-world scenarios.

Ethics and Employee Rights

Because not all organizations act ethically, laws and regulations are used to enforce standards and
define employee rights. In India:

 The Industrial Disputes Act of 1947 allows employees to approach labor courts for wrongful
termination.

 Employment contracts and standing orders also define rights and obligations.
  The Tata Code of Conduct is an example of a comprehensive ethical guide for corporate
behavior. It is enforced rigorously, and violations are acted upon swiftly.

Laws ensure that rights are respected even when ethics and morality fall short in practice.

What Shapes Ethical Behavior at Work?

Understanding ethical behavior in the workplace involves recognizing the factors that influence how
individuals make decisions. A well-known study summarized decades of ethics research with the
concept of:

“Bad Apples, Bad Cases, and Bad Barrels.”

This metaphor captures three primary influences on unethical behavior:

1. Bad Apples (The Person)

People bring personal values and moral reasoning into their jobs. Each individual must bear
responsibility for their ethical choices.

For instance, CEOs were surveyed about their likelihood to:

 Solicit trade secrets from competitors

 Offer bribes to foreign officials

The results showed that their personal predispositions and levels of cognitive moral development
(the ability to apply ethical principles in decision-making) played a greater role than external
pressures. Thus, individual character matters.

2. Bad Cases (The Situation)

Ethical choices are also shaped by the nature of the situation. People are more likely to commit
unethical acts in cases they consider minor or low-risk. Smaller ethical dilemmas are seen as less
serious, making them more susceptible to misbehavior.

However, small unethical acts often escalate into larger ones—a phenomenon known as the slippery
slope.

Social pressure is another factor. People may comply with unethical group behavior to avoid
exclusion or to maintain belonging, even if they know it’s wrong.

3. Bad Barrels (The Organization)

Some companies create toxic environments that encourage or condone unethical behavior. A
workplace culture that promotes cutthroat competition, individualism, or profit-at-any-cost can
lead to systemic unethical conduct.

Organizations with strong ethical cultures—where expectations are clearly communicated and
enforced—experience fewer ethical breaches.

How Managers Can Create Ethical Environments

1. Reduce Job-Related Pressures

Most unethical behavior stems not from greed but from pressure to meet unrealistic goals or
deadlines. A study found that employees often cited the following as causes of unethical behavior:

 Meeting schedule pressure

 Achieving aggressive business targets

 Helping the company survive

Only a small percentage said personal financial gain was their motivation.

Thus, removing excessive pressure and providing support can prevent ethical breakdowns.

2. “Walk the Talk”

Employees emulate their managers. If leaders act unethically, even subtly, it sends a powerful
message that such behavior is acceptable.

Unethical examples include:

 Instructing teams to “do whatever it takes”

 Taking credit for others' work

 Ignoring known misconduct

Supervisors must lead by example and be held accountable for both action and inaction.

Ethics Test (Raytheon Co. example):

 Is it legal?

 Is it right?

 Who is affected?

 Does it align with company values?

 How would it feel afterward?

 How would it look in the media?

 Will it hurt the company?

How HR Can Create Ethical Environments

1. Institute Ethics Policies and Codes

A formal ethics policy sets the tone and expectations. For example, IBM’s ethics code prohibits
accepting gifts or money from vendors or partners if it can influence business decisions.

2. Enforce the Rules

Without enforcement, ethical policies are meaningless. Managers must:

 Monitor behavior

 Use ethics audits (to review conflicts of interest, discrimination, privacy breaches, etc.)
  Conduct surprise audits and fraud training

Having chief ethics officers, like at Lockheed Martin, ensures centralized accountability.

3. Encourage Whistleblowers

Companies must provide safe channels for reporting wrongdoing:

 Hotlines

 Anonymous submissions

 Clear retaliation protection

In the U.S., the Dodd-Frank Act incentivizes whistleblowing with rewards. In India, while a bill was
introduced in 2011, many companies voluntarily offer protection, e.g., Infosys whistleblower cases
reviewed by SEBI.

4. Foster the Right Culture

Organizational culture includes shared values, behaviors, and traditions. Shaping this culture
involves:

 Clarifying expectations (e.g., stating honesty and fairness as core values)

 Using symbols and behaviors (leaders must act in accordance with values)

 Providing structural support (performance reviews, incentives, and promotions should

reflect ethical behavior)

For example, if the promotion system rewards only results without regard for ethics, unethical
behavior becomes incentivized.

Small Business Ethics

Small and medium enterprises (SMEs) are just as susceptible to unethical conduct as large firms,
often more so due to lack of resources.

Some challenges include:

 Bribery and corruption

 Payoffs to criminal groups

 Turning a blind eye to local malpractices

One example is U.S. firms using “local partners” to conduct unethical actions abroad to avoid direct
involvement.

For SMEs, ethical missteps can be fatal. A single dishonest act (like theft by a sales manager) may
jeopardize the entire company’s survival.

Steps for SMEs to Build an Ethical Program:

1. Conduct a self-audit of existing ethics-related activities.

2. Draft a clear, enforceable code of conduct.

 3. Train employees using realistic ethical scenarios.

4. Set up simple feedback systems (e.g., suggestion boxes).

5. Lead by example—the owner’s behavior is magnified in small companies.

Institutionalizing Ethics: The Case of Tata Power Delhi Distribution Ltd (TPDDL)

When the Tata Group acquired Delhi Vidyut Board and formed TPDDL, they inherited:

 High commercial losses (53% T&D losses)

 Unethical legacy behaviors

 Low employee morale and job security

TPDDL’s leadership faced the challenge of transforming a corrupt, inefficient system into an ethical,
high-performing organization.

Key initiatives:

 Adoption of the Tata Code of Conduct

 Ethics training programs for all staff

 “Voice of Employee” meetings to resolve grievances

 Introduction of whistleblower systems

 CEO acted as the Chief Ethics Officer

These efforts resulted in:

 Reduced losses and complaints

 Increased employee engagement

 Fewer reported ethical violations

Hiring the Right People

Ethical behavior starts with recruitment. Hiring individuals whose values align with the company’s is
critical.

Steps:

 Highlight ethics in recruitment material.

 Use tools like honesty tests and background checks.

 Ask behavior-based questions: “What would you do if…?”

Fair treatment during hiring also affects future conduct. Candidates evaluate:

 Procedural fairness (Was the interview job-related?)

 Interpersonal treatment (Was the interviewer respectful?)

  Feedback (Was feedback given after the process?)

Ethics Training

Ethics training helps employees recognize dilemmas and make principled decisions. It should
emphasize:

 The company’s code of conduct

 Real-life scenarios

 Strong support from senior management

In the U.S., the Sarbanes-Oxley Act (2002) and Federal Sentencing Guidelines (1991) incentivize
ethics programs.

In India, the Companies Act (2013) requires governance training for directors and employees.

Examples:

 Lockheed Martin delivers training via intranet and tracks compliance.

 Yahoo! created animated modules with global workplace scenarios.

Use Rewards and Discipline

Ethical behavior should be recognized and rewarded, while unethical behavior should be disciplined
at all levels, including top executives.

Employee Privacy Policies

Employees value privacy, but employers often monitor behavior to protect organizational assets.

Privacy violations may include:

 Email surveillance

 Publishing private data

 Monitoring off-duty conduct

 Accessing medical records

Legal Frameworks:

 U.S. Electronic Communications Privacy Act (ECPA): Permits monitoring under the "business
purpose" and "consent" exceptions.

 India’s IT Act (2000): Allows government interception with approval. Section 43A provides
compensation for data misuse. Post the 2017 Supreme Court ruling, privacy is a
fundamental right, prompting stricter data protection laws.

Best practices for employers:

  Obtain informed consent

 Limit the degree of intrusion

 Use data responsibly (purpose limitation)

Companies should clearly state that:

 Company communication systems are not private

 All messages on company devices are company property

 Surveillance tools (like GPS, iris scanning) may be used

Monitoring boosts productivity but must be balanced with ethics and legality.

Managing Employee Discipline

What Is Discipline in the Workplace?

Discipline refers to the set of actions taken to encourage employees to follow workplace rules and
behave sensibly. It becomes necessary when an employee violates rules, behaves inappropriately,
or underperforms. The ultimate purpose is not punishment but to maintain order, fairness, and
productivity.

Improper or arbitrary discipline can have serious consequences:

 It erodes trust between management and employees.

 It may lead to legal repercussions.

 It can result in retaliation, low morale, or deviant behavior.

 It contradicts the ethical standards the organization wants to maintain.

A study of 45 arbitration cases involving employee tardiness found that employers often lost
because they lacked clear disciplinary procedures or precise definitions (e.g., what counts as
"tardy").
The Three Pillars of Fair Discipline

To ensure that discipline is fair, ethical, and legally sound, organizations must build their approach
on three pillars:

1. Rules and Regulations

There must be a clear set of rules governing employee behavior. These should be communicated
beforehand—ideally in the employee handbook, during onboarding, and through policies posted in
the workplace.

Rules should cover areas such as:

 Attendance and punctuality

 Performance standards

 Safety protocols

 Substance use (alcohol/drugs)

 Conduct (harassment, theft, insubordination, etc.)

Example: The Infosys Code of Conduct includes excellence as a core value and expects employees to
meet high-performance standards.

2. System of Progressive Penalties

The second pillar is a graduated scale of penalties based on:

 The severity of the offense

 The frequency of recurrence

For example:

 First lateness → verbal warning

 Repeated lateness → written warning

 Continued offense → suspension or termination

Indian legal practice distinguishes between minor and major offenses. Minor infractions might
attract warnings, while major violations (e.g., theft, violence) may justify termination.

3. Appeals Process

An appeals process ensures that employees have the right to contest disciplinary actions. This
guards against abuse of authority and promotes fairness.

Example: FedEx implements a multi-step guaranteed fair treatment process (explained later),
allowing employees to escalate grievances all the way up to top executives.

However, appeals processes are not a fix for all problems. Some disciplinary actions that attack an
employee's personal or social identity may cause lasting damage, even if corrected later.
Diversity Counts: Gender Bias in Discipline

Research on disciplinary bias reveals a phenomenon known as the “Evil Woman Thesis”—the
tendency for both men and women to punish women more harshly than men for similar violations.

In one study:

 A male and a female employee, each violating drug policies, were compared.

 The employee who brought intoxicants to work was deemed more culpable.

 When the female was the violator, both male and female student evaluators were more
likely to support harsh discipline than when the violator was male.

Indian law protects pregnant women from wrongful termination through the Maternity Benefit Act,
1961, especially under Section 12, which restricts dismissal during pregnancy-related absence.

How to Discipline an Employee (Best Practices)

Managers should follow clear, just, and defensible steps when disciplining employees. Guidelines
include:

 Ensure that evidence supports the charge.

 Protect the employee’s right to due process—let them respond.

 Warn the employee clearly about potential consequences.

 Ensure that rules are reasonably related to safety and efficiency.

 Investigate thoroughly before acting.

 Use substantial, objective evidence, not hearsay or gut feeling.

 Apply rules consistently—no favoritism.

 Allow employees to be accompanied by counsel if appropriate (especially union workers).

 Maintain dignity—don’t discipline in public.

 Listen actively to the employee’s explanation.

 Stay calm—never discipline in anger.

 Follow the organization’s appeals process.

A sample discipline report form (Figure 14-4 in the book) documents the infraction, the manager's
response, and the employee’s comments and signature.
Discipline Without Punishment

Traditional punishment-based discipline has two problems:

1. It creates resentment.

2. It gains only short-term compliance—not genuine cooperation.

An alternative approach, known as “discipline without punishment”, is designed to correct behavior

while preserving respect and encouraging reflection.

Steps include:

1. Oral reminder for the first offense.

2. Written reminder placed in the personnel file for a repeated infraction.

3. One-day paid decision-making leave – The employee is asked to reflect on whether they
wish to follow company rules.

4. If no further issues occur within a year, the file is cleared. If misconduct recurs, the next step
is termination.

Serious offenses (like violence or criminal activity) are exempt from this process and may require
immediate action.
Example: Delhi Metro Rail Corporation (DMRC) uses a positive discipline system:

 Minor issues → oral warning and point-based penalty system

 Accumulated points trigger progressive actions

 Serious misconduct → immediate disciplinary action as per DMRC’s Conduct Rules

Employee Engagement: Becoming a “Best Company to Work For”

The chapter ends with a critical question:

How do companies become “Best Places to Work”?

Organizations are increasingly ranked and recognized for creating exceptional employee
experiences. The most notable list is Fortune Magazine’s 100 Best Companies to Work For®, based
on surveys from the Great Place to Work® Institute.

A great workplace is one where:

 Employees trust their leaders

 They take pride in their work

 They enjoy working with their colleagues

Case Studies: Best Places to Work

1. SAS (Statistical Analysis System)

Headquarters: Cary, North Carolina

Industry: Business analytics software
Employees: 13,000+

Key practices:

 Generous benefits: 3–4 weeks’ paid vacation, on-site childcare, gyms, healthcare

 No layoffs during the 2008 recession (public commitment by CEO)

 Flexible work schedules

 High employee trust, low turnover (~3% vs. 20% industry average)

 Estimated cost savings of $60M–$80M annually due to low attrition

2. Google

Key practices:

 Legendary benefits: Nap pods, cafés, dry cleaners, free transport, bowling alleys

 Known as “The Happiness Machine”

  Uses People Analytics and the People & Innovation Lab

 Continuously runs experiments to improve employee satisfaction

 Changed maternity leave policy based on analytics → cut female turnover by 50%

 Surveys employees on preferences (e.g., workspace design, compensation structures)

3. FedEx

Key practices:

a. Survey Feedback Action (SFA):

 Annual anonymous survey → assesses work environment and leadership

 Three phases:

1. Survey

2. Feedback session

3. Action plan

b. Guaranteed Fair Treatment Process (GFTP):

 A formal appeals system with three levels:

1. Management review

2. Officer complaint

3. Executive appeals board (includes CEO, COO, Chief Personnel Officer)

 Ensures fairness and accountability at the highest levels

 Promotes trust and deters arbitrary decisions

Final Insights: Human Resource Philosophy of “Best Companies”

Though these companies differ—SAS is private, Google is innovation-driven, FedEx is operationally

intensive—they share core HR philosophies:

 Cultivate trust with transparent, respectful management

 Offer continuous communication and feedback mechanisms

 Value employee input, recognition, and involvement

 Prioritize fair treatment, ethics, and engagement

 Reinforce positive behavior with incentives and culture

While each organization may need to tailor strategies to its own needs, the underlying principle is
universal:

Treat employees as valued partners in building a productive, ethical, and sustainable workplace.
 Chapter 15 – Labor Relations and Collective Bargaining

Introduction to Labor Relations

Labor relations is a critical aspect of human resource management that deals with the interaction
between employers and the collective workforce, particularly when employees are unionized. It
involves managing interactions with labor unions, navigating collective bargaining agreements,
addressing grievances, and maintaining compliance with labor laws. Labor relations is not just about
resolving disputes; it's about creating a stable and collaborative environment that allows both the
organization and its employees to thrive.

Labor relations primarily focus on:

 Managing union–management relations

 Negotiating contracts (collective bargaining)

 Addressing disputes and grievances

 Implementing labor laws and standards

In unionized workplaces, labor relations specialists act as intermediaries between the management
and the labor union. Their goal is to ensure that collective agreements are followed and that
conflicts are addressed constructively. The emphasis is on promoting fairness, equity, and workplace
democracy.

Understanding the Labor Movement

To appreciate the current practices of labor relations, one must understand the historical roots and
evolution of the labor movement:

The Early Labor Movement

In the 1800s and early 1900s, working conditions in factories and mills were often harsh and
exploitative. There were long hours, minimal wages, and poor safety. As a result, workers began
organizing into groups to protect their interests. These groups gradually evolved into formal labor
unions.

Key Milestones in U.S. Labor Legislation

Several major acts shaped modern labor relations:

1. National Labor Relations Act (NLRA) – 1935

Also known as the Wagner Act, this landmark legislation:

o Gave employees the legal right to form and join unions

o Required employers to bargain collectively in good faith with unions

o Established the National Labor Relations Board (NLRB) to enforce labor laws
 2. Taft-Hartley Act – 1947
This act introduced measures to balance the power between unions and employers, such
as:

o Prohibiting unfair union practices (e.g., coercion)

o Allowing states to pass right-to-work laws (employees cannot be forced to join a

union)

o Permitting employers to express anti-union views (under certain conditions)

3. Landrum-Griffin Act – 1959

Also called the Labor-Management Reporting and Disclosure Act, this legislation:

o Aimed to protect union members from corrupt union leadership

o Required unions to hold democratic elections

o Mandated annual financial disclosures by unions

These legislative milestones illustrate how the labor relations landscape has been shaped by efforts
to balance worker rights, employer interests, and public concerns.

Union Structures and Functions

A labor union is an organization formed by workers to protect and advance their collective interests.
In practice, unions advocate for better wages, benefits, job security, and safe working conditions.

Union Structure:

 Local Unions: Represent workers in a specific company or plant.

 National/International Unions: Provide broader support, legal guidance, training, and policy
direction.

 Federations: Umbrella organizations (e.g., the AFL-CIO) that coordinate actions among
member unions.

Union Functions:

 Represent employees in collective bargaining

 File and resolve grievances

 Provide legal assistance to members

 Educate members about their rights

 Lobby governments for labor-friendly legislation

Types of Union Security Agreements

Union security refers to the rules and contractual clauses that define the extent of union
membership and dues obligations. These agreements influence whether employees must join or
support a union.

1. Closed Shop:

o Requires workers to be union members before being hired.

o Now largely illegal under U.S. law (Taft-Hartley Act).

2. Union Shop:

o Employees must join the union after being hired (usually within 30 days).

o Common in many collective bargaining agreements.

3. Agency Shop:

o Workers are not required to join, but must pay union fees since they benefit from
collective bargaining.

o Used where full union membership is optional, but financial support is mandatory.

4. Open Shop:

o Workers are not required to join or pay union dues.

o Popular in right-to-work states that prohibit mandatory union membership or fee

payment.

5. Maintenance of Membership:

o Once an employee joins the union, they must remain a member for the duration of
the contract, but new employees aren't forced to join.

The Role of HR in Labor Relations

HR plays a central role in labor relations by:

 Assisting in negotiating collective bargaining agreements

 Ensuring compliance with labor contracts

 Handling grievance procedures

 Advising line managers on union-related rules

 Monitoring labor law compliance and reporting

In many cases, HR also represents the company during union campaigns or arbitration sessions.

The Collective Bargaining Process

Collective bargaining is the formal negotiation process between the employer (typically represented
by management or HR) and the union (represented by elected officials or union representatives).
The goal is to arrive at a mutually acceptable agreement on matters such as wages, working hours,
benefits, and working conditions.
This process is legally protected in many countries. In the U.S., for example, it is governed by the
National Labor Relations Act (NLRA), which mandates that both parties negotiate in good faith.

Steps in the Collective Bargaining Process

The process is generally structured in a sequence of phases:

1. Preparation

Before actual negotiation begins, both parties engage in extensive preparation. This includes:

 Assembling a bargaining team

 Collecting relevant data (e.g., wage comparisons, productivity levels, financial reports,
competitor practices)

 Identifying key issues and setting objectives (e.g., wage increases, safety enhancements)

 Reviewing the existing contract (if one exists) to identify changes

This phase is critical. A well-prepared team knows what it wants, what it's willing to compromise on,
and what it's absolutely not willing to concede.

2. Opening Demands and Negotiation

In this stage, each side presents its initial proposals.

 The union might propose higher wages, improved working hours, additional vacation days,
or stronger job protections.

 Management may counter with limits on wage increases or propose adjustments in shift
structures or benefits to reduce costs.

The negotiation process is often iterative and involves a series of offers and counteroffers. Both
sides use negotiation techniques such as anchoring (starting with an extreme offer), bargaining in
packages, or giving conditional concessions (“If you agree to X, we’ll consider Y”).

3. Bargaining (and Potential Conflict)

This phase can be intense, particularly if the issues are contentious. Bargaining may:

 Progress rapidly with small, continuous concessions

 Stall on major disagreements (wages, healthcare, job security)

 Break down entirely, resulting in an impasse

To reach an agreement, both parties must be willing to:

 Compromise on non-essential demands

 Use data and logic to persuade the other side

 Understand the zone of possible agreement (ZOPA)

If negotiations stall, third-party involvement may be considered.

4. Resolution of Impasses

If the two sides cannot reach agreement, several conflict resolution mechanisms can be used:

 Mediation: A neutral third party facilitates communication and suggests compromises but
cannot impose a settlement.

 Fact-Finding: A third party investigates the dispute and presents a report with
recommendations, often used in public sector negotiations.

 Arbitration: A neutral third party hears both sides and issues a binding decision. This is
often used for grievance resolution or in public safety sectors (e.g., police, fire).

o Voluntary Arbitration: Both sides agree to arbitration.

o Compulsory Arbitration: Required by law, typically in public services.

If resolution still cannot be reached, the union may call a strike, or management may initiate a
lockout.

Strikes and Lockouts

Strike

A strike is a temporary work stoppage initiated by employees. It is the union’s most powerful
weapon when bargaining fails.

Types of strikes include:

 Economic Strike: Aimed at obtaining better wages, benefits, or conditions.

 Unfair Labor Practice Strike: Protest against illegal employer actions.

 Sympathy Strike: Workers strike in support of another union.

 Wildcat Strike: An unauthorized strike not approved by union leadership—often illegal.

Strikes have serious implications:

 The employer suffers operational disruptions and financial losses

 Employees lose wages during the strike

 Public image of both the company and the union may be affected

Lockout

A lockout is the employer’s version of a strike. Management prevents workers from entering the
workplace and performing their jobs. This is done to pressure the union during negotiations.

While legal, lockouts must meet specific legal standards to be considered justified. They’re more
common in industries with high seasonal production (e.g., sports, manufacturing).

Ratification and Agreement

Once a tentative agreement is reached, the union presents it to its members for a vote. This process
is called ratification.

 If a majority vote in favor, the contract becomes binding and is implemented.

 If rejected, the parties must return to the bargaining table.

Once ratified, both parties sign a collective bargaining agreement (CBA), which is a legally
enforceable contract. It typically includes:

 Wages and benefits

 Working hours and overtime

 Grievance procedures

 Discipline and discharge protocols

 Union rights and responsibilities

 Duration of the agreement (commonly 3–5 years)

Administration of the Agreement

After a contract is signed, it must be implemented and monitored. This phase is often the longest,
as the agreement governs day-to-day operations for years.

Key HR responsibilities include:

 Training managers on contract compliance

 Ensuring fair application of contract terms

 Addressing grievances and disputes

 Documenting incidents for future negotiations

The grievance and arbitration system becomes the formal mechanism for resolving disagreements
related to the contract.

Grievance Handling Procedures

A grievance is any formal complaint lodged by an employee or the union alleging that management
has violated some part of the collective bargaining agreement or workplace policy.

Grievance handling is essential in maintaining labor peace. If left unresolved, grievances can grow
into major disputes, damage trust, or even escalate into strikes or lawsuits.

A good grievance procedure ensures:

 That employees have a fair, consistent way to address problems

 That contract violations are corrected

 That misunderstandings or policy ambiguities are clarified

Steps in the Grievance Process

Most collective bargaining agreements outline a step-by-step procedure for dealing with grievances.
Though the exact steps may vary, a typical grievance procedure involves the following levels:

Step 1: Informal Discussion with Supervisor

The employee raises the issue verbally with their immediate supervisor, seeking an informal
resolution. Many grievances are resolved at this stage through open communication.

Step 2: Written Grievance Submitted to Higher Management

If the issue is unresolved, a written complaint is filed. This usually includes:

 Description of the grievance

 Date and time of the incident

 Reference to the violated contract clause

 Desired remedy or resolution

This step involves a union representative and the next-level manager. Written documentation is
critical for clarity and record-keeping.

Step 3: Involvement of Senior Management and Union Leadership

If still unresolved, the grievance moves to senior management and higher-level union officials. This
stage may involve:

 Review of contract interpretations

 Examination of past precedent

 Additional negotiations

This is the last internal step before external resolution methods are considered.

Step 4: Arbitration

If no resolution is reached, the case may be submitted to arbitration, where a neutral third party
makes a binding decision.

Arbitration

Arbitration is a formal process used to resolve unresolved grievances or disputes in collective

bargaining.

There are two main types:

1. Grievance Arbitration

Used when one party believes the other has violated a specific part of the labor contract. For
example, an employee is terminated, and the union claims it violates the discipline policy.

2. Interest Arbitration
Used during collective bargaining when the parties cannot agree on new contract terms. It is more
common in the public sector (e.g., teachers, police), where strikes are not allowed.

The Arbitration Process

1. Selection of Arbitrator

o Both sides agree on a neutral party.

o May come from a roster maintained by agencies like the American Arbitration
Association.

2. Hearing and Testimony

o Each side presents its case, including:

 Documents (e.g., contracts, emails)

 Witnesses (e.g., supervisors, coworkers)

 Arguments from representatives

3. Decision

o The arbitrator issues a written decision, which is final and binding on both parties.

o There is no appeal, except in rare cases of fraud or procedural error.

Arbitration helps reduce court congestion and provides a specialized, fair resolution mechanism—
but it can be time-consuming and costly.

How Unionization Affects HR Practices

When a company’s employees are represented by a union, HR policies and daily operations must
align with the collective bargaining agreement. This affects almost all major HR functions.

1. Recruitment and Hiring

 The employer may need to follow rules on internal promotions, job postings, or seniority-
based hiring.

 Union agreements might restrict the hiring of temporary or contract labor.

 Tests or interviews may require union approval.

2. Compensation and Benefits

 Wages, overtime, shift premiums, bonuses, and benefits (e.g., health insurance, pensions)
are often defined in the contract.

 Merit pay or performance bonuses may be limited or standardized.

3. Training and Development

  The company may need to provide equal training opportunities to all members of the
union.

 Cross-training or job rotation must align with job classification rules.

 In some cases, union approval is needed to introduce new training programs.

4. Performance Management

 Formal performance evaluations may be subject to union review.

 Disciplinary actions must follow the “just cause” principle and be supported by
documentation.

 Performance appraisals may not be used for salary decisions unless specifically negotiated.

5. Discipline and Termination

 All disciplinary procedures must align with the collective agreement.

 Employees are often entitled to:

o Progressive discipline (e.g., warning, suspension, termination)

o Union representation in any meeting that could lead to discipline (Weingarten

rights)

o Appeal through grievance procedures

Discharges without proper documentation or due process can lead to arbitration or legal challenge.

Impact on Managers and Supervisors

Supervisors must be especially careful in a unionized environment. They are expected to:

 Know the contract terms thoroughly

 Document all incidents properly

 Avoid favoritism or inconsistency

 Work collaboratively with union stewards

 Seek HR support when addressing disciplinary or performance issues

Any action inconsistent with the collective agreement can lead to a grievance—and potentially
arbitration.

Current Trends and Challenges in Labor Relations

Labor relations is not static. It continually evolves in response to changes in the economic
environment, technology, political climate, and societal expectations. Several key challenges
currently define the labor relations landscape:

1. Decline in Union Membership

In many countries, especially the U.S., the percentage of workers represented by unions has
declined significantly over the past few decades.

Reasons include:

 Growth of service sector and gig economy, where union presence is traditionally weaker

 Increased focus on individualized HR policies (flexible hours, performance-based incentives)

 Shift to right-to-work laws in many states, which weaken union funding by banning
mandatory dues

 Negative perceptions or political opposition to unions

The decline has led to a reduced collective voice for many workers, although it has also forced
unions to become more strategic, flexible, and service-oriented.

2. Globalization

As companies expand across borders, labor relations become more complex. Global operations
mean dealing with:

 Multiple legal systems

 Different cultural norms regarding work and authority

 Varying levels of union influence

Multinational corporations must adapt their labor strategies to each country’s environment while
ensuring consistency with corporate values.

For example, collective bargaining may be mandatory in Europe, while it may be optional or
nonexistent in some Asian countries. This requires HR to carefully balance global HR policies with
local labor compliance.

3. Technological Change

Technology has transformed how work is done—and how labor relations are managed.

Impacts include:

 Automation of routine jobs (especially in manufacturing), leading to fears of job losses

 Use of AI and analytics in employee monitoring, scheduling, and even discipline

 Rise of remote and hybrid work arrangements, changing the nature of workplace
interaction and oversight

Unions and employers alike must reconsider how to apply traditional labor principles (like job
classification or overtime eligibility) in this new, tech-driven context.

Unions have responded by:

 Demanding training and reskilling programs

  Negotiating protections against job displacement

 Advocating for digital rights (e.g., limits on monitoring or algorithmic management)

4. Political and Legal Pressures

Labor relations are influenced by changing laws and political administrations. Governments may
pass regulations that:

 Support or weaken union powers

 Change minimum wage, healthcare mandates, or safety standards

 Define the legality of strike actions, lockouts, or union elections

For instance, under different U.S. administrations, the National Labor Relations Board (NLRB) has
alternately favored employers or unions in key rulings—affecting how easily workers can unionize or
how employers can communicate during campaigns.

HR professionals must constantly track legal changes to remain compliant and anticipate labor
relations impacts.

Strategic Labor Relations Management

To thrive in this shifting landscape, organizations must adopt proactive and strategic approaches to
managing labor relations.

1. Open Communication and Transparency

The most fundamental strategy for avoiding labor disputes is maintaining open and honest
communication between management and employees.

Companies should:

 Regularly solicit employee feedback

 Encourage employee voice through forums or committees

 Provide clear and timely information about company decisions that affect workers (e.g.,
restructuring, automation)

Transparent communication helps build trust and reduces the likelihood that employees will feel the
need to turn to third parties, such as unions, for support.

2. Employee Involvement and Engagement

Many organizations have turned to employee involvement programs—like joint labor-management

committees, employee councils, or quality circles—as ways to improve morale and solve workplace
issues collaboratively.
When employees feel valued and empowered to influence decisions, it can:

 Reduce interest in unionization

 Improve productivity

 Enhance workplace harmony

These programs can coexist with unions or serve as alternatives in non-unionized settings.

3. Preventive Labor Relations Strategy

Rather than waiting for conflict to arise, progressive companies practice preventive labor relations,
which involves:

 Regular review of employment policies for fairness

 Monitoring workplace climate through surveys or exit interviews

 Rapid conflict resolution mechanisms (such as early mediation)

Preventive strategies reduce the occurrence of grievances and build a positive organizational
culture.

4. Win-Win Bargaining

Also known as interest-based bargaining, this approach contrasts with traditional adversarial (win-
lose) bargaining.

Instead of starting from conflicting positions and negotiating concessions, both sides:

 Focus on shared goals

 Explore mutual interests

 Collaboratively generate solutions

For example, rather than fighting over wage increases, both parties might explore ways to boost
overall compensation value through non-monetary benefits (e.g., wellness programs, skill training).

This approach:

 Preserves long-term relationships

 Builds trust

 Often leads to more sustainable and creative outcomes