Abstract

Employment relations: How do employees influence HRM?

Key Theories
Power / Resource dependence
Employee exit, voice and silence
Critical and unitarist perspective
Industrial relations theories
Employee involvement theories

Key HR Practices
Different types of direct and indirect participation
Employee grievance procedures
Employee ownership

“Workers have interests in social change and redistribution” (Heery, 2010)

Employment relations involve the exchange of labor for returns between employers and employees. After agreeing on a more or less beneficial package of reimbursements, employees agree to submit their efforts to the employer and become the subordinate party in the employment relationship. Hence, in return for pay, employees allow employers to exert power over the things they do, the goals they pursue and the effort they put into their tasks during the time they get paid for work. By accepting an employment relationship, employees submit their time, skills and effort to a managerial prerogative, the manager’s right to manage, and this manager ensures that these skills are directed in line with the needs and goals of the organization. This means that managers can decide, without consulting employees, how to direct the workforce, the distribution of tasks, how to discipline employees if needed, how to adjust the number of employees according to the demands of the organization and decide about the strategic direction of the organization. Under full managerial prerogative, employees are silenced: the leeway to express concerns by raising their voice is limited. Indeed, full managerial prerogative infers an essentially one-way communication channel where all the power lies with management. This managerial prerogative has been opposed for various reasons by employees.

The first warning against full managerial prerogative is driven by fairness concerns. As the employees are the subordinate party in the employment relationship, there is little an individual employee can do to stand against unfair treatment. The main source of power for employees is to withhold their contribution to the organization, but that would imply breaking the employment contract and would likely result in dismissal. This makes the stakes of standing up against management too high for individual employees. However, when employees unite and voice their complaints together under the threat of a strike, the power balance between managers and employees becomes more equal. Strikes are disruptive for organizations and can harm their productivity. Therefore, when employees as a group exert their power, they can stand up to managerial power and negotiate an improvement of work conditions for all. One employee who complains is vulnerable, but as a group, employees can develop power to withstand managerial prerogative. This power play between employers and employees has been formalized in institutions like labor unions and employment law that nowadays guide ‘fair play’ between managers and employees. The origins of modern industrial relations coincided with the rise of industrialization about two centuries ago. As a reaction to the exploitative labor conditions under which mass production was realized, workers began to unite against and oppose, sometimes violently, their employers. The literature describing the power and influence of labor unions and organized labor representation is called industrial relations (Kaufman, 2010). For a long time, this represented the main perspective on employment relations. The task of human resource management (or better; personnel management) was to ensure that employees were satisfied and that employment relations stayed as harmonious as possible. It was only in the 1980s that human resource management developed as an independent discipline which promoted the ideology that investing in employment relations not only safeguards harmonious employment relations, but also directly benefits the performance of organizations. It is indeed this ideology that drives the second warning against managerial prerogative.

The second warning against the weak power of workers is driven by concerns for business effectiveness. If managerial prerogative silences workers, then the knowledge of those who understand the most about work processes would get lost and improvements in business effectiveness would be impossible. Getting input from employees, involving them in decision-making about their own jobs and even the strategy of the organization may tap into a great amount of human and social capital and make organizations more effective in reaching their goals. Involving employees can take many forms, ranging from posting an ‘idea box’ to make suggestions about improvements, to incorporating employee representatives in the strategic board of organizations. The employee participation literature examines the pitfalls and benefits of different types of employee involvement.

Although the two warnings against managerial prerogative aim to increase the power of workers, their theoretical objectives are very different. The perspective put forward in industrial relations is one of conflicting interests between employers and employees. Employers and employees represent two parties who have different stakes in the employment relationship. Employers’ first and foremost interest is to make a profit by keeping costs low and working as efficiently as possible. This goes against the employees’ interest to gain a fair income for as little effort as possible. Given that the balance in the power of both parties is in favor of employers, any initiative aimed at increasing employee productivity, however nice in terms of benefits, training, or participation, is still an expression of managerial prerogative. For the real cynic, the word human resource management in itself is an expression used to mask that managers just want employees to work harder (Legge, 2005).

In contrast, the participation literature departs from the idea that empowering employees is beneficial to both workers and the organization. From this perspective, it is possible that the interests of employees and employers are both served: what is good for the organization is also good for the employees. This core debate between pluralistic or critical scholars who say that employment relations always involve conflicting interests and unitarist scholars who claim that investments in human resource management benefit both workers and organizations, dominates the literature on employment relations. For the ease of understanding the literature on employment relations, both perspectives are presented separately in the section on key theories.

In practice, different formal and informal institutions like labor unions, statutory works councils and employee representatives, employer-sponsored participation initiatives all happen at the same time within organizations. In the research section, the key findings about the power that each of these institutions allows workers are presented. Moreover, some areas of conflict between different rates and types of involvement are highlighted.

Theory

Before this section goes into the distinct paths of theories about industrial relations and theories about employee participation, we need to understand their commonality and differences. The commonality concerns the question of power between employers and employees in the employment relationship, which is dealt with first. The difference lies in the perspective scholars take in the outcome of this power difference. Industrial relations scholars are critical; they see conflict as a result of the uneven power between employers and employees. Employee participation scholars on the other hand see organizational benefits in bridging the power gap between employers and employees. Hence, the outcome variable in employee participation literature is employee and organization performance, rather than conflict and justice. After this introduction, the separate literatures on industrial relations and employee participation are described.

The power question

The two main actors in the employment relationship are employers and employees. Positions in the upper part of the organizational hierarchy such as shareholders, executives and managers all act in the interest of the employer. Put simply, the employer’s interest is to make a profit, or more broadly, to realize the strategic goals of the organization. Employees work in the lower echelons of the organizational hierarchy. The work structure, tasks and goals for employees are all laid out by the higher echelons in such a way that profit maximization will be realized. Employees in return accept their position in the organizational hierarchy in return for a fair reward that suits their interests: income, development, leisure time and interesting work. In this exchange relationship, the employer’s power to control employees in the lower echelons of the organization is a legitimate means to achieving organizational goals. Employees accept their position because they accept their personal returns. In this way, organizations can function as a whole: allowing managers to manage (the managerial prerogative) so that organizations can function efficiently and realize their profit maximization goals.

In organizations, managers are the ones setting the agenda. In doing so, they determine which management decisions require employee involvement and which decisions are just a ‘given’ for the employees. Which subjects are discussed and which are not reflects the relative power that managers and employees have? Power is about having influence. It is the ability that individuals and groups have to exert influence over decisions by others that affect their physical and social environment (Hyman, 1975). The question then is how much power employees possess after they have accepted to subject their time, skills and effort to managerial prerogative in return for benefits.

The relative power of employees over employers can be understood as a form of resource dependence (Pfeffer & Salancik, 1978). Resource dependence theory states that the behavior of organizations can be best understood from their relations with other organizations. This is because organizations depend on resources and these resources ultimately originate from an organization’s environment. This environment contains other organizations that own resources that another organization may need. Here lies a source of power for those who own the resource. Power and resource dependence are directly linked, because the power of organization A over organization B is equal to organization B’s dependence on organization A’s resources. Power thus exists in relations, depends on the situation and is potentially mutual between employees and employers. Labor is an important resource for organizations and unlike other resources, labor is not owned by organizations. Instead, it is power that resides in the workers themselves who can decide for themselves where they will work. Organizations with the right human capital perform better than their competitors. However, employees ‘own’ the skills and competencies important for the organization to succeed, and so they hold power over employers.

The degree to which employers are dependent on workers depends on the difficulty that the employer would face in replacing them or finding substitutes for them. The scarcer the knowledge and skills that workers possess, the more power they possess. Imagine a high-tech organization that only needs the most intelligent and highly educated workers. In today’s labor market, such specialists are rare given that they are in short supply and organizations need them to perform various roles within their organization. Due to their scarcity, such high-skilled workers can demand quite a lot of employers. Following this same logic of resource dependence, employees can also exert power when they unite and act as a group. Perhaps an organization is not very dependent on a single non-unique worker who can be easily replaced because his or her skills are widely available on the labor market. However, when an entire workforce organizes a strike and stops working, employers become much more aware of the resource dependence. Hence, if employers’ resource dependence on employees is high, the power of workers increases.

In contrast, employees are also dependent on employers. It may not always be easy to find another job and even if finding another job is feasible, it still costs employees a lot of effort and uncertainty to really leave. This factor will influence the degree to which employees feel free to exert their power in the employment relationship. Rather than feeling powerful, many employees experience degrees of powerlessness when it comes to their influence over their work, their teams and the organization as a whole.

The question of power and in particular employees’ levels of influence on their work environment has generated two competing streams of literature: the critical and unitarist perspective. Both perspectives and their conclusions about the power of workers are explained in the following section.

The critical perspective

To understand the origins of the critical perspective on employment relations, we need to turn to sociologist Karl Marx. In 1867, Marx published the first volume of ‘Das Kapital’, the book that marked the beginning of socialist and communist politics (Marx, n.d.). The book is a critique on the classical market economy, and in particular on the malfunctioning of classical market principles when it comes to labor and wages.

The idea behind Marxist theory is that labor is the only thing that adds value to raw materials and semi-manufactures. Steel, crops, and bricks do not automatically turn into cars, food and buildings. Indeed, each material needs labor in order to be turned into a product. In old, small-scale economies, the person who owned the materials was also often involved in the production of goods. All the added value that followed from selling products rather than materials flowed back to the person who did the work. The clear relationship between labor, added value and income changed drastically with the rise of industrialization. In this new economy, the materials and the machines used to transform the materials were all owned by a small group of people. These capitalists hired labor to realize the transformation from raw goods to products. However, the largest percentage of this labor added value was now returned to the owners of factories and machines: the capitalists. The people who provided the labor, the working class, were still rewarded (paid) for the value they added but did not benefit fully from the value that they created. Moreover, the production process was so dull and far away from the real interests of employees, that they became alienated from their jobs: the jobs no longer provided them with meaning, fun and, importantly, there was no ownership. In this new situation, society became divided in two groups. On the one hand, an ever-decreasing group of capitalists who own all the means for production: the bourgeoisie. On the other hand, an ever-increasing group of laborers struggling to live off their low wages earned in jobs they did not like: the proletariat. Marx and Engels saw revolutionary potential in the proletariat. They predicted that the capitalists were digging their own graves. The growth of the proletariat provided laborers with political power to overthrow the capitalist system: the “Kladderadatsch”. In an ultimate effort to try and turn the tide, the capitalists would become willing to provide workers with more say in labor negotiations. However, according to Marxism, eventually workers would take over the control of production.

Marxism is a theory about conflicting interests and power. The stake of the conflict is how much of the added production value should flow back to employees. Because individual employees have less power than employers, the odds of getting the largest share is in favor of the employers. This type of thinking in conflicts rather than harmony has developed into an important paradigm within sociology research. The essence of conflict-based theory is that social systems are always characterized by inequality between groups. Here we focused on the difference in power between employers and employees, but similar power inequalities can be observed in the relative status of men and women, and of high- and low-educated social groups or between local and foreign-born people. In any such social system of inequalities, interactions between groups are not defined by consensus, but by conflict.

A conflict-based theory like labor process theory for example warns us about hidden forces that employers use to make employees work harder for the same pay (Thompson & Smith, 2009). For example, flexible working arrangements where employees can decide where and when they work are apparently liked by employees, because they allow them more flexibility in combining work and private life. However, managers eventually use such ‘nice’ HR practices because they expect that employees will be more motivated and willing to go the extra mile. By allowing employees to work anytime and anywhere, the working day is also expanded into one’s private time. Therefore, this perspective on employment relations is called critical: initiatives of managers for employees can have a ‘hidden agenda’ of increased productivity expectations and should not be accepted without hesitation. By organizing labor, the power of workers can be enlarged and formalized. This way, workers get the ability to have a say in managerial initiatives and negotiate a better deal for themselves.

In sum, according to the critical perspective employees and employers have conflicting interests. Due to the unequal power between them, employers benefit more than employees, who collect less value than they add to the organization.

The unitarist perspective

Another element of the power question concerns the untapped knowledge and insights embedded within employees. If for any reason employees do not feel secure to speak up, their insights and valuable knowledge may not be utilized which can harm the productivity and efficiency of the organization. From the unitarist perspective, power is a concern for managers not because its dilution could raise all kinds of protests, but rather the contrary: retaining absolute control assumes that managers know it all, and it is widely known that this is far from the truth. Following this line of thinking implies that inviting employees to participate in decision making is beneficial for both employees and organizations. By collaborating, both the interests of employees and employers are simultaneously served.

In fact, most thinking about human resource management fits this unitarist perspective on the benefits of harmony and cooperation. Especially the work done in the area of investing in people and performance highlights that practices such as providing good wages, providing training and development opportunities, careers and providing information, will increase the worth of human capital, which in turn will benefit the organization (Legge, 2005).

The power question from a critical and unitarist perspective

Employment relationships are characterized by mutual dependence between employers and employees. This mutual dependence provides each party with power. The critical perspective warns against the power advantage of employers over employees and takes a fairness perspective to judge the effects that the employment relationship has on workers. The unitarist perspective is eager to focus on unleashing the power of employees through the benefit of their knowledge and skills for the functioning of the organization. Both perspectives are interested in the likelihood that employees will voice their complaints or opinions to employers. To better understand the dynamics of voice, we present the work of Hirschman on exit, voice, loyalty and silence.

Employee exit, voice, loyalty and silence

What are the potential responses from employees when they are dissatisfied about how they are managed? Hirschman, in 1970, asked this same question about customers who are dissatisfied with the products or service that organizations provide (Hirschman, 1970). He noticed that dissatisfied customers can react in three different ways to the organization: they can exit doing business, they can voice their concerns, or they can stay loyal and feel dissatisfied but be unwilling or unable to complain or quit and fall silent. Similar reactions can be observed when employees are dissatisfied with their employer.

First of all, like customers, employees can simply decide to quit doing business with an employer. Specifically, such a reaction would imply leaving the organization and indeed, job dissatisfaction is an important reason for quitting one’s job. The exit reaction is an example of the classical market mechanism: in case of dissatisfaction with one product, customers move to another provider. Likewise, organizations that offer less attractive jobs will find it more difficult to find and retain workers as they will opt for different employers.

However, not all dissatisfied employees immediately leave their jobs. For various reasons they may still feel loyal to their employers. Customers who have always liked the service of the organization may not immediately quit but instead voice a complaint to the organization. In a similar fashion, employees may speak up and voice their concerns to their employers. Employees who do speak up to their employers enter the political game of exercising power. Employers are not necessarily opposed to employee power, as the exit option is also undesired from an employer’s perspective. The costs of rehiring procedures are considerable. Think for example about recruitment costs, training new hires and the loss of organization-specific knowledge. Therefore, exercising voice is a way to address the interests of workers in the employment relationship, but it is also in the interest of organizations. Voice involves information sharing between employees and employers aimed at changing some policy or practice at the organizational level (Allen & Tüselmann, 2009).

The final reaction by employees to dissatisfaction with an employer is silence. This is the case when employees are dissatisfied with their jobs but feel unable to quit or voice their concerns. Silence happens because employees who voice their concerns may be seen as disloyal or disruptive to their employers. For fear of being punished or laid off for not being loyal, they opt for not complaining and staying loyal to their employers, even if they are actually dissatisfied. This loyalty may present as neglect, when employees just accept the circumstances and continue business as usual. Or their loyalty may become superficial. In spite of leaving or complaining, they accept the circumstances but alter their efforts and become less motivated and may show counterproductive behavior like showing up late for work (Farrell, 1983).

Voice from the critical and unitarist perspective

The critical and unitarist perspectives on managerial prerogative broadly inspired two related but separate streams of literature about the power of workers. Industrial relations fall under the critical perspective as it looks at mechanisms to eliminate employee dissatisfaction. The employee empowerment literature, on the other hand, focuses on capturing suggestions from employees in order to improve business performance and falls under a more unitarist perspective (Dundon et al., 2004). Table 1 summarizes the commonalities and differences in employee voice from the critical perspective (industrial relations) and unitarist perspective (employee involvement).

The table illustrates that voice goes two ways. It involves expressing grievance and justice concerns on the one hand and expressing suggestions for improving work and the organization on the other hand. The first is at the center stage of industrial relations theories where the focus is on justice, and the latter is central in theories of employee empowerment. The next section will explain both these perspectives in greater depth.

Industrial relations theories

The literature describing the power and influence of labor unions and organized labor representation is called industrial relations (Kaufman, 2010). Early industrial relations were proposed as a middle way between socialist revolution and pure capitalism. Although the classic market economy view predicted that employees would simply leave their organization if they thought they could get better conditions in other organizations, in practice it is often difficult to move. In many cases, workers have no other option than to accept disadvantageous employment conditions. Karl Marx proposed that this inequality between workers and the bourgeois would lead to a collapse of the capitalist system. The angry mass of workers would revolt against the capitalist system and turn it around in their favor. However, apart from Russia, Cuba and China, in most industrialized countries the predicted revolution never took place. Gradually and over time, the pure capitalist market economies started to build in all kinds of protections for workers, which reduced the need for a revolt. Industrial relations played a significant role in softening the consequences of a pure market economy.

Economist Joseph Schumpeter looked at the development of pure market economies into societal systems that build social protection for workers. He agreed with Karl Marx that the capitalist system was determined to collapse, but he rejected the idea that this would happen with a clash between different classes (Schumpeter, 1942). Instead, he proposed that the intellectual class, those citizens who were well educated and whose numbers were continuously increasing, would oppose the disadvantageous working conditions of the working poor and intervene by getting involved in politics. He envisioned politics as a means to represent the interests of vulnerable groups. According to his view, industrial relations is the politics to represent the interests of workers.

Hence, rather than fighting the bourgeois, industrial relations provided the political mechanism to balance the needs of workers with the requirements of organizations. By protecting workers against the detrimental consequences of free market mechanisms, industrial relations could avoid social unrest and enhance welfare. Early examples of the effects of industrial relations interventions in the free market for labor were laws against child labor (the first one introduced in Prussia (Germany) in 1839), and subsequent laws to protect workers from extreme working hours, illness and old age. By installing mechanisms through industrial relations so that fair wages and conditions could be provided, industrial relations were seen to function as a repair mechanism for failures of the ‘free’ market. In this way, labor gained a special position in market economic theories: although labor could be viewed according to the laws of demand and supply, it should not, because labor is not a commodity like other resources needed by organizations. Because labor is inseparable from people, it is not just another commodity and it ‘acts’ in accordance with its own specific laws involving politics, which all other commodities do not care about (Kaufman, 2010). The unique characteristic of labor being subject to human agency influenced by hierarchical structures, social norms, laws and the like, ensures that labor does not reach an equilibrium level in wages (the pure market economic expression of the value of labor). Hence, some kind of governance in the form of labor relations that determines what adequate pay and employment regulations could be is needed to create this equilibrium between labor demand and supply.

Just by taking a look at how employment relations developed in the past century, it appears that Schumpeter was correct. Industrial relations are institutionalized, and their role in determining the conditions of work has been accepted as the normal way of doing business. Figure 6.1 shows all stakeholders involved in modern industrial relations in Europe. The triangle represents the boundaries of the organization. In the upper part of the figure, you can see the employer and its representatives (employers’ association), the state and the workers’ representatives (unions). The interaction between these three (employers, employee, state) sets the boundaries for industrial relations. The state prescribes laws that follow from political coalitions and negotiations with employer and employee representative bodies. Further negotiations, within the limits of the law, can lead to collective agreements that cover many employees within an organization or even within a complete sector. Together, the three-party structure of industrial relations enables social rest and economic prosperity – thus benefiting each party.

At the lowest level within organizations, industrial relations take the form of union involvement in managerial decision-making. These organizational-level industrial relations are again bound by the higher structures in the model. For example, the presence of a sector-wide collective agreement sets the terms and conditions to all that are covered by the arrangement. Hence, objections at the lowest level are unjustified as long as the agreement is active. This often implies that it is forbidden to strike as long as the collective agreement applies.

To conclude, industrial relations theory concentrates on the special character of labor and shows that labor does not act according to the classical market economic theory. Instead, multiple parties (state, employers’ associations and unions) safeguard the ‘price’ equilibrium for labor, resulting in stability and benefits for society, employers and employees alike.

Power of workers through unions

Trade unions are the representative body for individual workers. Workers who team up with trade unions are far less vulnerable than isolated workers (Hyman, 1975). An individual worker is easily dismissed, but when workers unite, they can exert power. However, the enthusiasm among workers to join a union has been waning since the 1980s. In Europe for example, on average 6 out of 100 employees are paying union members (Bechter & Brandl, 2015). This reduction in worker representation in unions affects the bargaining power of unions as their legal representatives.

There are several explanations for this decline in union membership among workers. The dominant explanations are free riding behavior, job uncertainty and substitution in the form of human resource management strategies.

Free riding. The welfare state provides for all, not just for union members. Pensions, insurance for illness and unemployment benefits are accessible for all citizens. In addition, the outcomes of union negotiations with employers’ representatives often extend to all employees in an organization or even in a sector. This results in a taking-for-granted attitude among workers covered by collective employment agreements. The necessity for individual membership is no longer obvious, which causes free riding behavior.

Job uncertainty. Unions traditionally serve those who have permanent jobs with a single employer. Since the increase of flexible work arrangements and the uncertainty that this causes for employees, many decide not to join a union. Some may decide not to join out of fear of being perceived as disloyal to their employer, which could prevent their employers prolonging their contracts. Some may also think that the membership costs are too high when their income is uncertain. Unions have been accused of being too protective towards their members with permanent jobs and in fact this makes it more difficult for those on temporary contracts to obtain job security.

New types of work. Unions have done little to adapt to changes in the types of work. For example, there has been a steep increase in the number of workers who opt for a self-employed career. Many of them work alongside permanent employees, for example in the health care sector or in the construction industry. So far, unions are struggling to advance their position towards such new kinds of work arrangements.

Substitution. Finally, the rise of human resource management as a strategic management discipline may account for the decline in union power. With human resource management becoming more strategic by investing in people to increase the value of human capital rather than viewing employees as operational costs that need be cut, many of the issues advocated by unions have become part of the managerial agenda (Fiorito, 2001). The effect is that human resource management practices in fact substitute the work of unions. Employees do not see the added value of being a union member because their interests are apparently looked after by their employer through various HRM practices.

To try and turn the tide and maintain bargaining power, unions have merged or now cooperate in confederations. One of the reasons why the system of industrial relations does not collapse, is because it not only benefits workers, but also employers, as is depicted in the next section.

Voice and industrial relations

Voice is one of the potential responses from employees when they are dissatisfied. Rather than leave or stay silent, they can express their dissatisfaction or concern to address a specific problem or issue with management. However, the risks of speaking up in a power relation between employers and employees rests with the employee. Although the complaint may stem from more employees, the one who voices the concern is the one bearing the risk of conflict or dismissal. The power unbalance between employers and employees reduces the likelihood that employees will speak out when they feel they should. However, the alternatives to voice, exit and silence, are equally undesired by employers as well as employees.

Freeman, in 1980, suggested that industrial relations in organizations can deal with the concerns of individual workers to voice their concerns by offering official channels through which voice can be expressed (Freeman, 1980). Three types of channels for voice are common in modern organizations: grievance, collective bargaining, and joint consult committees. Each of these channels allow for the expression of voice and are expected to reduce exit behavior, as is shown next.

Grievance procedures. The installment of an official grievance procedure makes it easier for employees to come forward to express their concerns. Many organizations today have such practices in place. They often involve a strict procedure following up on the complaint, including steps for a fair hearing of all parties included in the complaint. Think for example of cases of fraud or sexual harassment or violence at work. Grievance procedures allow a communication channel for victims (those at the low end of the power hierarchy) with built-in safety guidelines to prevent complaints from backfiring on the one raising the issue. Rather than leaving the organization (exit), the grievance procedure provides a safe channel for voice, whereby exit from the organization is prevented or at least postponed.

Collective bargaining. Bargaining procedures between employer and employee representatives (unions) provide a channel for putting forward expectations (e.g., wage increases) by employees as a collective demand. This can reduce exit behavior by employees, because they will wait for the outcome of the bargaining before they decide to exit. The collective exit rates will be lower under employment arrangements that result from collective bargaining. Collective bargaining is also efficient from the employer’s perspective because the effort of collecting information and negotiating wages with individuals is substantial.

Joint consult committee (JCC). JCCs are formal decision-making structures within organizations consisting of employee representatives (sometimes union members, in other cases elected employees) and management representatives who together take responsibility in managerial decision-making. In a JCC, part of the managerial prerogative is diluted to employees. In particular, all kinds of workplace decisions are made on the basis of negotiated rules in JCCs. Topics negotiated can range from employee benefits, to work procedures, flexibility and basically each human resource practice that affects employees. Employee representatives have easy access to their coworkers making the channel for upward voice easily accessible for all. JCC involvement in management decisions affecting the workplace guarantees that employee interests are looked after. The voice gained through JCCs is a safe way to collectively make work more satisfying, which reduces the potential of employees to exit the organization.

Freeman (1980) demonstrated that union members have lower turnover rates than non-union employees, proving the evidence that having voice (through union membership) indeed lowers the exit response in the case of job dissatisfaction. He notes the potential trade-off between exit and voice: if employees have voice, their quit rates will be lower.

Freeman’s work opened the door to a more managerial perspective on the power of workers. Indeed, the view is that there is something to be gained for business performance by involving employees and hearing their voices. Managers have come to realize benefits that come with opening up voice channels to employees. Since the 1980s, researchers also became interested in the managerial perspective on employee involvement. In addition to employee retention following voice, appreciation was gained for the power of involving employees in decision-making because it can strengthen the functioning of organizations. The next section illustrates the key theories in the employee involvement domain.

Employee involvement theories

Releasing the power of workers can benefit not just employees’ well-being, but it can also strengthen the functioning of organizations as a whole. Improvements often happen because employees work together in solving a task; through trial and error, they come up with new insights. Improvements are very hard to think of by just thinking about it behind a desk. Managers often lack real knowledge of the work processes they supervise and have to rely on the information provided by employees to understand where opportunities for improvement exist. There is power in the involvement of employees in management, and human resource management can contribute to the willingness of employees to share their feedback, their ideas for improvement and their willingness to take charge in improving performance in their jobs, their team and the organization as a whole (Wood & Wall, 2007). Effective involvement of employees is depicted in two related behaviors: voice behavior (daring to speak up when having concerns) and proactive behavior (making suggestions and taking charge). The conditions that facilitate the willingness of employees to engage in voice and proactive behaviors is called ‘empowerment’, which literally means giving autonomy or power to employees.

Voice as behavior

Employees who enact voice communicate their suggestions, ideas, concerns, or opinions about work-related issues with the intent to improve the functioning of the organization. Examples could pertain to improving processes in their jobs, cooperation structures in their teams or malfunctioning IT systems, or customer treatment. Voice can go two ways: bottom up and top down. It can go downward if managers invite employees to speak up. However, continuously asking for input is not very efficient for management. Rather, managers like to see employees showing upward voice in which employees engage in voice behavior whenever they feel it is necessary.

Upward voice is discretionary (free choice) behavior of employees (Morrison, 2011). They do not have to do it; it depends very much on whether they feel apt to express their views or not. Engaging in free will voice behavior is anything but simple. Remember the loyalty issue introduced by (Freeman, 1980). Employees may perceive their engaging in voice behavior as an act of disloyalty to their employer because this involves questioning the status quo. If they feel that they have nothing to gain, or worse: something to lose, they will not engage in it. Fear for consequences may lead employees to withhold their ideas and concerns from management (Morrison, 2014). This is a serious issue influencing the effective functioning of organizations. Interviews with employees indicate that at least 40 percent of employees have withheld information from the organization because they felt that it would not benefit or even harm them. Organizational functioning can be seriously hindered if this happens. Consider for example an employee who knows about a colleague who engages in dysfunctional activities that may harm the organization. Not speaking up about it will prolong and increase the harm done. However, raising serious complaints against a colleague or even against management may backfire at the whistleblower. Many cases of whistleblowing illustrate the severe consequences for the individuals who spoke up, ranging from damaged social relations within the organization to even losing one’s job. The fear of negative consequences following voice is therefore not completely unjustified. Although consequences of day-to-day voice behavior will not be that severe, it illustrates how employees may hesitate to speak up even if they should help the organization.

Staying silent rather than expressing voice also affects employees’ satisfaction with the organization, which will hamper their performance and reduce their overall commitment to the organization. An additional consequence of employee silence (the opposite of voice) is lower employee morale. For the reason of incorporating voice in normal behavior at work, research and practitioners have turned to the somewhat broader construct of proactive behavior, which emphasizes alignment of employee initiative-taking behavior for improvement with the goals of the organization (Bindl & Parker, 2011), rather than just speaking up – the essence of voice behavior.

Employee proactive behavior

Rather than just speaking up in case of unfair treatment or dissatisfaction, proactive behavior is about taking the initiative to actively change and improve one’s own work, team and the organization as a whole (Crant, 2000). It goes one step further than voice behavior because it involves taking charge in suggesting improvements. Not only voicing a complaint, but also suggesting how to improve it. It is about not only voicing an idea, but also showing how it can work and be implemented.

Proactive behavior is an appreciated, much-desired activity because of its positive contributions for both organizations and employees. Proactive employees show better job performance because they take the initiative to really improve the way they do their jobs. Moreover, employees feel good about taking charge: it gives them confidence in themselves, and it makes them better like the jobs they do. Moreover, by showing proactive behavior, employees have to connect with others in the organization and in this way they contribute to the social capital of the organization (Thomas et al., 2010).

Although some employees are more likely to engage in proactive behaviors than others because of their personality, it is possible to create environments that promote voice and proactive behaviors, as is shown in the next section on empowerment.

Empowerment

The managerial interest in employee involvement comes forward in the word ‘empowerment’, which refers to all initiatives aimed at increasing employee performance and motivation through delegating authority to the lowest level in the organization where a competent decision can be made (Seibert et al., 2004). In the 1980s, empowerment became a big management hype, leading to the introduction of so-called self-managed teams who, without managerial interference, could decide for themselves how to organize work, when to order supplies and to improve production processes if necessary. One famous example is that of the Volvo factories in Sweden, which completely transformed the traditional production line into workshops where teams of production workers together assembled a complete vehicle. Before, employees only performed one task on the production line and felt no responsibility for the end product. The success of Volvo inspired many other organizations to adopt team working structures and greater delegation of responsibilities to employees. Today, reorganizations to reduce the level of hierarchy and managers can be understood within the context of the drive for greater employee empowerment.

Empowerment practices aim to give employees the opportunity to make decisions, to have access to information to make good decisions and to support in the form of feedback, and to receive help if needed, and to have all resources needed to take responsibility (Spreitzer, 2008). Hence, empowering employees is about creating a context that facilitates employees to feel responsibility when making decisions. This is not an easy task. For employees to really take the responsibility for delegated authority, they need to feel able and motivated to do so. Empowerment should therefore be understood from a contextual perspective (which structures are there to facilitate empowerment) and from a psychological perspective (do employees really feel empowered).

Structural empowerment refers to all initiatives taken to delegate authority to the lowest level and involve employees in managerial decision-making. Structural empowerment can be achieved by considering the composition of teams, by changing the design of jobs (providing decision latitude, autonomy and teamwork), by changing the style of leadership (a coaching rather than authoritative style), and by providing organizational support (resources, help, feedback, information).

Psychological empowerment is a psychological process by which employees feel empowered. Cognitions are influenced by the environment in which people work (Thomas & Velthouse, 1990). No matter how nice the structural context for empowerment, if employees do not feel that they have the power to make their own decisions in their jobs, nothing much will happen. Psychological empowerment is a psychological state that is necessary for individuals to feel a sense of control in relation to their work. The motivation to engage in empowerment will only happen when employees feel that there is reason to do so (meaning). For example, an employee might feel able to change a certain work method, but if this employee does not have a good reason to do so then they will not initiate the change. Moreover, employees must feel that they are capable of acting in an empowered way (self-efficacy). Furthermore, empowerment will only happen when employees think that it will lead to desired results at acceptable costs and risks (impact). The last mechanism is the ‘energized-to’ mechanism, which states that an employee will be more likely to engage in proactive behavior if he/she experiences positive affect related to acting autonomously (self-determination) (Spreitzer, 2008).

Clearly, psychological empowerment relates to structural empowerment. As the impact of each separate empowerment practice is limited, it makes sense to bundle them together so that all practices are aimed at creating a state of psychological empowerment. For example, the effects of delegating responsibility to the team will be hindered if combined with an authoritarian style of leadership.

To conclude, psychological empowerment is a state of mind in which employees take ownership of their jobs and show proactive behavior in order to align their performance in the best interest of the organization. Such behavior is of great value to organizations and can be facilitated by effectively designing jobs, providing support and matching leadership styles, all to promote employee empowerment.

Involvement and industrial relations

The two streams of literature presented in this chapter (industrial relations and employee involvement) are in practice often intertwined. Initiatives to improve bottom-up involvement of employees exist next to union and non-union formal employee participation institutes like joint consult committees, as is depicted in Figure 6.1.

Power to the workers?

The question arises how effective these forms of participation are in realizing the power of workers. Or, put differently, which forms of representation are the most effective in pressing the interests of workers? If worker interest is phrased as the redistribution of power in such a way that the wealth and well-being of workers gains more weight in managerial decision-making vis-a-vis making business profit (Heery, 2010), the effectiveness of all participation and involvement initiatives can be held against this outcome. Although any type of participation gives some power to workers, the effectiveness of various practices differs. Clearly, a suggestion box system that asks employees for input to improve business performance is less effective in redistributing power to employees than a joint consult committee.

The effectiveness of participation practices in redistributing power to workers depends on the scope of topics of employee interest that they can participate in (the breadth of employee involvement) and on the actual say that employees have in each topic (the depth of employee involvement). For example, a joint consult committee can be an effective vehicle to redistribute power, but only if the topics discussed are of interest to the employees, and only if the committee meets regularly and if their decisions really influence work processes (Cox et al., 2006). Hence, to be effective, the combination of involvement practices should give enough breadth and depth to making a difference so that the employees’ voice is heard and listened to. These practices can be derived from industrial relations, but also from managerial initiatives to stimulate employee involvement.

Industrial relations scholars have been struggling with the position of human resource management in relation to the power of workers. Since the introduction of the term ‘human resource management’ in the 1980s, critical scholars warned against the seizure of employment relations by managers, because they viewed human resource management predominantly as a vehicle used by managers to make employees work harder. The concern was that in organizations investing in HR practices that are generally liked by employees, unions would have less influence. They reasoned that if management rather than unions got involved in organizing employee involvement, it would ‘silence’ employees (Marchington & Grugulis, 2000). However, research shows that management-initiated human resource management does not silence unions. Instead, it appears that in organizations that have active industrial relations (union involvement), the adoption of modern human resource management practices also happened more than in organizations where industrial relations only play a small role (Benson, 2000). This apparent lack of conflict of interests between management and unions in relation to employee participation requires a new perspective on employment relations that can unite the critical and unitarist perspectives that dominated the debate up to 2000.

A new perspective: Pluralist view on employment relations

A concluding note should be made about the conflict and unitarist perspectives introduced at the beginning of the chapter. A new paradigm comes to the fore in the study of employment relations that does more justice to reality that a pure conflict or a pure unitarist perspective: Pluralist employment relations theory. The idea of a pluralist view is that there are multiple stakeholders involved in employment relations who all have different interests (Budd & Bhave, 2008). For example, the key interest of employers is organizational performance, while employees want a fair income and good jobs, and the state has an interest in social stability. The number of stakeholders in employment relations can be extended to include customers (who may require fair trade products), the natural environment and the economy at large. With so many parties having a stake in employment relations, conflict is inevitable. However, rather than being problematic, conflict is perceived as something that happens naturally and that can be resolved. If you look at systems of employment relations, you notice that they always develop towards some equilibrium in which the interests of all parties are balanced, until something happens which eventually results in a new equilibrium of the system. All parties involved eventually strive for continuity and balance. Conflict according to the pluralist view is therefore constructive, and not aimed at disrupting the system.

The application of a pluralist perspective to the issue of human resource management initiatives in stimulating employee involvement versus industrial relations explains why these can co-exist. Unlike the warning of critical scholars that human resource management has a hidden managerial agenda to make employees work harder, in a pluralist view this agenda is not secret but it exists next to the agenda of workers who have their own interests. Human resource management practices aimed at employee participation and performance and industrial relations aimed at strengthening the bargaining power of workers can therefore co-exist and reinforce one another.

To conclude, the pluralist view on employment relations integrates the apparently conflicting interests between managers and employees and shows how redistributing managerial power to workers can benefit both parties.

Key research

Due to the differences in research traditions in industrial relations and in employee involvement, there appears to be more ‘evidence’ for the causes and consequences of managerial induced involvement and empowerment than for industrial relations. Since much of the industrial relations research is qualitative, involving cases, country comparisons or historical analyses, there are virtually no meta-analyses in this research domain. However, there are a number of large-scale studies that can shed light on the effectiveness of industrial relations with regard to redistributing the power to workers.

1. Industrial relations and the power of workers. There is some research on the effectiveness of diverse participation practices in giving employees a voice in managerial decision-making. Several large-scale studies have investigated the consequences of combinations of direct and indirect employee involvement practices on employee satisfaction. According to the exit-voice tradeoff, employee satisfaction can be perceived as a proxy for the redistribution of power to employees. The logic is that when participation practices lead to higher levels of employee satisfaction, the voice mechanism in reducing exit intentions is effective. Results of a study in ten European countries (Denmark, France, Germany, Ireland, Italy, The Netherlands, Portugal, Spain, Sweden and the UK) using data from almost 6,000 workplaces revealed that the incidence of direct involvement practices is considerable, but that the breadth and depth of topics in which employees are involved was quite limited. The study also found that in workplaces with more breadth and depth in employee involvement practices (EIP), indices of employee exit behavior and silence were lower (sickness, absence, employee turnover). In addition to this study, analyses of the largest employment relations panel data in Europe using workplace characteristics and employee reports, the Workplace Employee Relations Survey, indicates that the depth and breadth of employee involvement eventually determine how satisfied employees are (Cox et al., 2006).

2. Employee involvement and empowerment. The amount of research on structural and psychological empowerment is overwhelming. A meta-analysis published in 2011 largely supports that structural empowerment practices such as high-performance managerial practices, socio-political support, participative leadership styles, and work characteristics are each strongly related to psychological empowerment (Seibert et al., 2011), and that an increase in structural empowerment has lasting effects on improved job satisfaction (Laschinger et al., 2004).

HR practice

Channel for indirect participation

The overview below sums up the most common employee involvement and industrial relations practices within organizations. The overview begins with practices that originate in industrial relations and then moves to employee involvement practices, with joint consult committees taking a middle position (also see Figure 6.1).

Collective agreement (CA). Collective agreements regulate the terms and conditions of employment for employees and employers. They are negotiated between management (representatives) and unions (employee representatives). Large organizations can have their own CA and smaller organizations often follow (by law) the CA for their sector.

Grievance procedures. These are formal procedures, often invoked by collective agreement, about the sequence of reactions and the hierarchical levels involved following a (written) complaint by an employee.

Union representatives in the organization. These are appointed union members who look after the implementation of collective agreements in the organization to make sure that management and employees are in compliance with industrial relations laws and regulations. They can also act as spokespersons for employees who have grievances against the organization. They also recruit new union members and disseminate information from unions to employees in the organization.

Joint consultative committee (JCC). A group of people who represent the management and employees of an organization. The JCC meets for formal discussions before decisions that affect the employees are taken. In many countries, JCCs have statutory rights about the issues for which co-determination consent is due, either prescribed by law or agreed in collective agreements. Other words used for JCC are works counsel, Betriebsrat in German-speaking countries, or enterprise counsel in most European countries. The employee representatives in a JCC can be union and non-union members. Non-union members are mostly elected by employees, but sometimes non-union workers are appointed by management to participate in a JCC. To get an impression of the variety in JCC arrangements and practices in Europe, see (Bechter & Brandl, 2015). On the spectrum between employee involvement and industrial relations, JCCs take a middle position. Their task is to look after employee interests, but they take an equal interest in improving the organization’s performance.

Channels for indirect participation

Employee surveys or employee satisfaction surveys. By means of a survey, management can understand how employees feel about their jobs, the organization’s culture and its management. Issues that emanate from the aggregate survey results are input for managerial decision-making.

Employee briefings or Information sessions. Used by management to inform employees about organizational performance, strategy, or changes. Although essentially a top-down communication tool, management can use such briefings to get a feel for the sentiment among employees, for example to see if there is support for organizational changes.

Self-managed teams. Self-managed teams have full decision authority on how they realize their goals. Tasks that are traditionally performed by team managers are delegated to the team, including performance appraisal of team members. After reaching agreement on the performance targets for the team, employees can decide amongst themselves how to distribute tasks and which resources are needed. They monitor their own performance costs and gains and adjust when necessary.

Team meetings. These are (often weekly) meetings between a manager and his or her team of employees aimed at discussing operational issues and ideas for improvement. Management uses team briefings to update employees about decisions, and managers can ask employees to respond. There is no formal decision-making power for employees through team briefings, but they are a useful channel to involve employees.

Bilateral meetings. These are one-on-one meetings between managers and each of their employees. Managers use these to understand their employees’ motivation and to discuss performance and ideas for job and career development.

Quality circles or innovation teams or suggestions system. Teams of employees are elected (by management) to discuss quality issues (quality circles) or to come up with new and better ways of working, improved business strategies, or new and improved products and services (innovation teams). Many organizations also have systems through which individual employees can make suggestions for improvement (idea box). The intent of such bottom-up employee involvement practices is predominantly aimed at improving organizational performance.

Workers in an employment relationship accept that business owners and their delegates (managers) determine what they do during the working day, in return for pay. The decision power about organizational strategy, targets, job design and the like therefore lies with management; not with employees. This is called managerial prerogative. However, workers are not commodities: they can think, act and feel and they can exert power to object to managerial prerogative. This power play between managers and employees can be studied from a conflict perspective, a unitarist perspective and a pluralist perspective. Labor relations takes the conflict perspective: that managers and employees have conflicting interests, and that negotiations and worker action (strikes) are needed to protect the interests of workers. In most countries and organizations, these are institutionalized in negotiations between worker unions and employers, who exert power over terms and conditions of employment. In contrast, the employee involvement literature argues that management takes an interest in listening to employees’ voice because employees know more about the actual work in the organization than they do. Employee involvement is about voice behavior, as well as structural and psychological empowerment. In practice, labor relations and employee participation structures operate simultaneously: labor unions, statutory works councils and worker representatives and employer-sponsored participation initiatives all happen at the same time within organizations. This exemplifies the existence and importance of a pluralist view on employment relations.