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11 Global Employee Relations

UNION TROUBLE IN KOREA’S AUTO INDUSTRY

Korea’s automobile industry has had ongoing challenges with labor union disputes,such as those in the spring of 2003, when unions at Ssangyong Motor Co. and HyundaiMotor Co. decided to go on strike. To avoid future work delays, General Motors(GM) Daewoo Auto & Technology Co. and the labor union representing the SouthKorean employees planned at that time to hold wage negotiations for the first time insix years. The union concluded its guidelines for the talks and said that it wanted a24.3 percent wage hike.

New labor laws in South Korea were introduced in the late 1990s to allow thelarge Korean conglomerate chaebols, such as Samsung and Hyundai, to becomemore competitive by getting rid of surplus workers. Although South Korea has pur-sued economic reform more aggressively than its Asian neighbors, its labor forcegenerally is considered inflexible and in need of further reform. In large companieswith strong unions, it is difficult to reduce the workforce, even if the company hasserious problems. Thus, the presence and nature of labor unions are important fac-tors influencing an MNC’s decision about investing in a certain country.

GM learned about the challenges of labor relations in South Korea when it tookover a majority stake in Daewoo Motors for $251 million in April 2002, with a viewto secure a firm presence in Asia. Daewoo Motors, which later was renamed GMDaewoo, had seen its market share halved to around 10 percent after the DaewooGroup went bankrupt in 1999 under total debts of $17 billion. Partly due to an im-passe between unions and the U.S. investor, negotiations were protracted over twoyears after GM expressed an interest in taking over Daewoo Motors.

A strident opponent to this deal with GM was the powerful Korean Confederation ofTrade Unions (KCTU), which was concerned about GM’s alleged behavior as a foreigninvestor. In a position paper in April 2000, the union leadership said that GM had long-time involvement with Daewoo Motors through a joint venture in the early days of thecompany, and that GM as a major U.S. investor was notorious for its aggressive corpo-rate culture and anti-labor practices. KCTU’s main concern was that Daewoo would be

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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downgraded to become nothing more than a powerless subcontractor assembly plantwithin GM’s large portfolio of global operations. However, KCTU’s concern and dis-dain for the agreement was tempered by the desire of Daewoo employees to preservetheir jobs. Economic reality prevailed, and ironically it was Daewoo workers who pres-sured the unions to soften their hard line. The employees realized that, at the end of theday, they would continue to get their paychecks only if they still had a job.

INTRODUCTION

Employee relations, known simply as “ER” in many organizations, is the broad areaof human resources dealing with the nature and quality of the relationship betweenorganizations and their employees.1 This relationship is characterized by the mannerin which employees are treated with regard to their physical, psychological, andeconomic well-being. This treatment is also influenced by several external factorssuch as unions and governments. Thus, the primary focus of employee relations inglobal workforce management is on the nature in which employees’ personal inter-ests and needs are protected and served by MNCs as well as influenced by otherexternal factors.

Besides the MNC, other important external parties are very interested and oftenquite influential in attending to the interests of employees, such as in the openingscenario depicting union involvement. Several of these important external partiesand influences were discussed in chapter 1, including social preferences, employeeinterest organizations (such as unions and NGOs), governments (both individuallyand collectively through multilateral agreements), and intergovernmental organiza-tions, such as the U.N., ILO, and WTO. Globally competent firms should be awareof these different external parties and influences in managing a productive employ-ment relationship. Our ER focus in this chapter will be on the roles and influence ofthe two principal parties of company and employees. In addition, we will examinethe influence of unions representing the legal voice of employees.

Commonly—especially in the past—the field encompassing human resources andER has been referred to more narrowly as industrial relations, labor relations (em-phasizing labor unions), or even the combined “industrial and labor relations” (ILR).In this chapter our broad use of ER is inclusive of both union and nonunion work-place arrangements and influences. In addition, our intended scope for global ERreflects the much broader and expanding array of employee work environments be-yond industrial and heavy manufacturing. This chapter first will examine severalcurrent and pressing ER issues in global workforce management. With these majorcurrent issues in mind, we then will consider important practices of MNCs for opti-mizing their success in globally managing the employment relationship, followed byforms of influence and current issues related to labor unions.

CURRENT ER ISSUES

Ferocious global economic competition has spawned a relentless search by MNCsfor the lowest production and operational costs. Their competitive survival often

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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depends on their success in this search. On the supply side, the increasing accessibil-ity of the world’s workers has created a huge pool of labor vying to compete forMNCs’ low-paying jobs, with little ability to refuse the unsafe working conditionsthat contribute to low operational costs. And many governments, desperate for in-creased jobs and national economic strength provided by MNC foreign direct invest-ment, also compete in attracting MNCs for access to cheap and/or skilled labor.Fortunately, market imperatives compete with the tendency to seek the lowest laborcost and help to maintain employment in traditional markets—the advantage of lo-cating business operations near consumers for company recognition and acceptanceas well as for logistics savings.

Given this background of global competitive pressure and opportunities for achiev-ing lower labor costs, much of the global labor force is vulnerable to workplace abuseby some shortsighted, unethical organizations—those that seek to maximize their ben-efits at the expense of workers and their communities. Other organizations with nomalicious intent may inadvertently contribute to employee workplace difficulties andabuse due to lack of awareness of the impact of their business activities, such as throughtheir distantly managed operations that are outsourced and contracted to foreign com-panies and state-owned enterprises. We now will examine current critical global ERissues and challenges related to worker protection that companies should be aware ofand consider in their ongoing business planning, including in cooperation with localgovernments, unions, and other parties concerned with employee protection. Theseissues include forced labor, harmful child labor, workplace discrimination, health andsafety hazards, and job insecurity and displacement.

FORCED LABOR

From an ethical perspective, we believe that the nature of the job in which one isengaged is just as important as whether one is employed. Some jobs are contrary tobasic social and human rights and international law and will always be “bad” orunacceptable wherever they are found, regardless of the level of a country’s eco-nomic development. Many unacceptable jobs are represented by various forms offorced labor, or labor in which the worker is engaged involuntarily and under someform of duress or threat of negative consequence (see Figure 11.1).

The most common form of forced labor is bonded servitude, typically arranged tofulfill a debt or other obligation. Bonded servitude is still common in SoutheastAsia, such as when one is forced to enter a working arrangement (essentially sla-very) until a debt is paid—or perhaps as a permanent arrangement. A conservativeestimate by the ILO (International Labor Organization, a major administrative agencyof the United Nations) places the number of victims of forced labor globally at 12.3million, or at least four victims of forced labor per thousand workers.2 Certain rela-tively low-power groups, such as women, ethnic or racial minorities, migrants, chil-dren, and the severely economically disadvantaged, are particularly vulnerable tobeing trapped under various forms of forced labor.

Globally, the majority of cases of forced labor (64 percent) are created by privateagents for the purpose of nonsexual economic exploitation. Only 20 percent of all

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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forced labor is perpetrated by governments or armed forces (official or guerilla),while forced commercial sexual exploitation represents 11 percent of all cases. Thecategory of nonsexual economic exploitation in many cases can be combined withgovernment-imposed forced labor because governments often provide contractedservices for MNCs through their state-owned enterprises.3 According to an ILO glo-bal estimate, the greatest number of workers in forced labor conditions for economicexploitation and state-imposed work are in Asian and Pacific countries, followedclosely by Latin America and the Caribbean—the primary difference being due togreater state-induced forced labor in Asian and Pacific countries. Other significantlocations of economic exploitation through forced labor are in sub-Saharan Africa,followed by the Middle East and North Africa.

Forced labor jobs are typically located in the worker’s home country, but alsomay be found abroad as a result of a growing trend in human trafficking—an illegalglobal industry estimated at over $14 billion per year. This trend can be noted incases of transferring workers illegally from poorer countries into developed coun-tries under bonded servitude and in dire conditions with the promise, often violated,of future new citizenship and financial prosperity, coupled with the threat of disclo-sure leading to local imprisonment or worse. About 20 percent of all forced labor foreconomic exploitation is due to human trafficking. Although a relatively small amountof forced labor for economic exploitation is found in industrialized countries andtransition countries (for example, former Eastern Bloc countries such as the CzechRepublic and Romania), approximately 75 percent of forced labor in these countriescomes from human trafficking.4 In one instance, a pickle factory in the United Statesemployed several Indian workers through an international labor-recruitment firm.Upon arrival in the United States the workers’ legal travel documents were forciblytaken from them, and they were forced to work twelve to sixteen hours a day, sixdays a week, at well below the legal minimum wage. Finally, several workers es-caped and eventually filed a civil suit against their employer.5

HARMFUL CHILD LABOR

An especially heinous form of forced labor for economic exploitation is harmful childlabor, as depicted in Global Workforce Challenge 11.1. Through excessive working hoursand under poor conditions, as well as at the neglect of education, the child’s personaldevelopment can be greatly compromised and permanently damaged, pointing to a life-time of poverty and misery. This harmful child labor is a pervasive problem throughout

Figure 11.1 Forms of Forced Labor

• Bonded servitude• Slavery• Compulsory participation in public works projects• Forced labor in agriculture and remote rural areas• Domestic workers in forced labor situations• Forced labor imposed by the military• Some aspects of coerced prison labor and rehabilitation through work• Forced labor imposed by private agents for commercial sexual exploitation

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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the world, especially in developing countries, where work is frequently considered nec-essary to support family livelihood. Approximately 180 million children between theages of five and fifteen are engaged in forced labor, or about one in eight children acrossthe world. The Asia/Pacific region has the greatest incidence of child labor at 60 percentof the global total, with sub-Saharan African next at 23 percent.6 Working children oftenare the objects of extreme exploitation, where they toil for long hours for minimal payand under poor working conditions, frequently not provided adequate stimulation andother conditions for proper physical and mental development.

As part of a vicious cycle, child labor is recognized as a cause of poverty becauseit deprives children of the education, skills, and health they need to find suitableemployment at an appropriate age, which could help lift them out of poverty. Theabsence of national policies actively discouraging child labor, or ensuring effectiveschool attendance of all children up to the specified age, directly and indirectly en-courages conditions in which child labor can exist, thereby undermining futureskills formation and economic growth. This situation calls for collaborative mea-sures by local governments and businesses to eradicate the need for child labor byimproving the employment wage conditions of parents and older children.

Nike announced that it would no longer employ workers younger than eighteenyears of age in its shoe factories, putting an end to any fears that it was hiring childlabor. Although at first appearing positive, this plan does little for the seventeen-year-old in Indonesia or Vietnam who would rather work for an American multina-tional than for a domestic employer. Age eighteen is well beyond the end of minimalcompulsory education in most Asian countries, the age where the child labor lineshould be drawn. Nike’s solution is partial at best and perhaps even counterproduc-tive, because it ignores the economic reality facing millions of children around theworld. The best thing for children, of course, is to stay in school, acquiring skills thatwill increase their future earning capacity. Several developing countries, includingBrazil and Mexico, have recently launched innovative schemes aimed at providingfinancial support to poor families so that their children need not leave school to begor seek work. In some parts of Brazil, for example, school attendance of childrenfrom low-income families is encouraged through an income subsidy to mothers con-ditional upon the children’s enrollment and attendance. The positive results of thisapproach are being closely examined with a view to its wider adoption, both withinBrazil and in other countries. There is no guarantee that basic education and effec-tive school attendance will reduce poverty, but lessons from many countries suggestthat such policies involving investments in present and future labor force educationform a major part of a productive response to poverty.7

But not all children stay in school, and for them employment in an MNC’s manu-facturing plant might be better than the next-best legal alternatives: working in do-mestic industries or begging. An extreme, inflexible policy against all child labor,even part-time, under the age of eighteen could prove more harmful than the childlabor itself. For example, in the 1990s, an ethics crusade was launched against majormanufacturers of soccer balls, including such brand names as Reebok and Nike.Their balls were made mainly in Pakistan, often by children. Due to the outcry, thecompanies set up a new manufacturing facility and outlawed the use of child labor.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 307

Unfortunately, the community that once made the balls suffered when the compa-nies quit the town due to higher labor costs, leaving the community with fewer jobopportunities and no further educational prospects for local workers, especially womenand children. Here we see that ethical decision making leading to long-range posi-tive outcomes also must take into account the prevailing relative level of economicdevelopment and the potential unintended impact of well-intended decisions.8

WORKPLACE DISCRIMINATION

Another major global workforce ER challenge is workplace discrimination, whichcan have a harmful effect on the economic well-being and livelihood of people from

GLOBAL WORKFORCE CHALLENGE 11.1

FORCED CHILD LABOR

India’s tobacco road runs through the southern state of Tamil Nadu, a place where traditions stretchback to the beginning of recorded time and where, in the world’s largest democracy, children are stillsold into bonded servitude. Although illegal across India, the practice continues in remote areaswhere enforcement is lax. Many are engaged in the low-cost manufacture of the “bidi,” a new exoticcigarette popular among young people of the West and sold in convenience stores and tobaccoshops. Consisting of tobacco wrapped in a leaf, bidis sometimes are sweetened and flavored, suchas with chocolate.

Every day, Shamshad rolls bidis for as much as ten hours, rolling 500 a day. Her story is typical.Six months ago she suffered seizures that threatened her life. The family desperately neededmoney for medicine so it struck a terrible bargain: They sold Shamshad’s labor to a money lenderin return for a twenty-five-dollar loan. Most often children, from as early as five years old, arebonded for many years, laboring anonymously in their own homes as childhood passes them by.The cigarettes produced by the children are turned over to the money lender, who acts as asubcontractor providing finished bidis to an Indian company that exports them to the rest of theworld. The company claims that it employs an adult workforce and insists that bonded labor is neverused in making its cigarettes.

According to Gary Haugen, an American lawyer devoted to rescuing children from illegal bondage,the average price for a child is twenty-five to fifty dollars. The length of service can last from a fewyears to a lifetime. Often, due to excessive loan interest rates and minimal payments for work, it isnot possible to pay off the loans. In his briefcase, Haugen carries shackles that a colleague pried fromthe ankles of a boy who once ran away from a money lender. Haugen has set up a non-profit groupof investigators he calls the International Justice Mission.

Haugen’s investigators go door to door, searching for bonded children. They document each childlabor case with a sworn affidavit to present as evidence to Indian courts, who then will free the child.In recent months, the International Justice Mission had freed more than 200 children. One of thesechildren, Kanchen, was bonded for six years and now attends a special school for freed children.Through a translator, she said that she was bonded when her mother died and the family neededmoney for funeral expenses. During her bondage, her employers beat her for being late or for doingunsatisfactory work.

Source: Adapted from 60 Minutes II broadcast, “Tobacco Slaves in India” (CBS Worldwide, 2000).

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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308 CHAPTER 11

several demographic groups within the global labor force, including racial minori-ties, members of particular religions, older individuals, women, the disabled, andregional migrants and immigrants.9 Not only should discrimination be avoided toprotect the interests and rights of individuals but efforts also should be made to pre-vent discriminatory practices where possible to ensure that business decisions arevalid and based on relevant job-performance criteria—decisions associated with op-timal business performance. For example, although under some conditions nepotismmight be a useful recruitment practice to quickly yield an adequate supply of work-ers, an ongoing recruitment approach that relies primarily on family relationshipsrather than actual job applicant qualifications and merit will likely lead to a workforcewith suboptimal talent and little diversity of background and experience to contrib-ute to company success in a global economy.

In an increasing number of countries, companies can be fined severely for illegaldiscriminatory practices in the treatment of their employees and potential job candi-dates, causing an additional burden to their ability to compete. Companies are alsofinding that they face an “extraterritorial effect,” where their liability for unfair dis-crimination can cross national borders to protect their expatriate employees as-signed to other countries where antidiscrimination laws may be weak or nonexistent.In addition, despite MNCs’ location of home headquarters, they are subject to thelocal antidiscrimination laws of the host countries, thus protecting HCNs and TCNs.And in some cases equality of treatment requirements can transcend national bor-ders. For example, in a high-profile case, a forty-two-year-old British investmentbanker who had worked seventeen years for Merrill Lynch in London sued her formerU.S.-based employer on British statutes for sex discrimination, unequal pay, andunfair dismissal. She maintained that because she was doing like work and work ofequal value as her male colleagues working in other countries, she should have beencompensated accordingly.10

Besides decreased performance capability and increased legal liability due to work-place discrimination, companies can suffer significant damage in image and reputationamong consumers and potential employees. Potential customers may boycott or doother damage, even violence, to businesses that are known to discriminate againstpeople like themselves. And where worker shortages exist, including for critical high-tech and professional services, regional migrants and immigrants attracted by highwork demand may be hesitant to relocate to those areas where others like them haveexperienced discrimination.11 For example, Britain has significant dependence on for-eign nurses, with one in four nurses in some National Health Service (NHS) hospitalshaving been recruited from abroad, notably South Africa and India. One study foundevidence that many of these nurses were being denied promotion due to institutionalracism. According to Pippa Gough, who researched the study,

We have had a huge influx of internationally recruited nurses over the past few years and theNHS is now increasingly dependent on them to plug its staffing problems. But these nurses arefinding it very difficult to progress up the career ladder. If we do not do something about this,these foreign nurses are going to be lured to other countries, such as America, and the NHS willbe left unable to attract and retain international staff. That could be disastrous. (p. 16)12

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 309

HEALTH AND SAFETY HAZARDS

The right to a safe and healthful workplace is under threat around the world as thecompetitive global economy puts tremendous pressure on reducing and minimizingcosts associated with occupational health and safety regulations. Worldwide, accordingto the International Confederation of Free Trade Unions, there are two million fatali-ties on the job each year (3,300 deaths per day) and 160 million new cases of work-related diseases.13 Moreover, it is estimated that for each fatality there are 1,200accidents resulting in three or more days off from work and 5,000 accidents requir-ing first aid.14

In 1984 at the U.S. MNC Union Carbide’s plant in Bhopal, India, due to poortraining and inadequate safety precautions, a forty-five-ton lethal gas leak killedmore than 3,800 people and disabled more than 20,000 in the surrounding commu-nity in history’s worst industrial disaster. Workers in Mexico’s U.S.-bordermaquiladoras and in other developing country host operations, like those at UnionCarbide’s Bhopal plant, often live immediately adjacent to the worksite, in partbecause wages are so low that they need to be able to walk to work. Not only doworkers and the community suffer the catastrophic effects of disasters like that atBhopal but the employees also regularly receive a “double dose” of toxic exposure—at work and in their homes and communities where the toxicity is also found.15

Yet the overlap of occupational and community/environmental exposure occurs inboth the developed and developing worlds. The lack of updated standards and newrules to address newly recognized hazards, plus the lack of resources (human, fi-nancial, and technical) for enforcement activities, clearly indicate that in manycases developed countries face a risk of heading in the same direction as manydeveloping countries.

Direct and indirect company costs due to workplace health and safety neglect lead-ing to debilitating accidents and illness can be considerable, including the following:

• Wages paid for time lost• Damage to material or equipment• Higher-paid overtime work by others to fill in for an injured employee• Disability payments• Increased company health insurance premiums• Litigation and possible fines where liability is determined• Time and expense to recruit and train a replacement to an equal level of performance• Time spent to investigate an accident

In avoiding these costs, we note that an ethical commitment to meeting employeehealth and safety needs does not have to detract from a company’s competitive vi-ability. Measures aimed at improving occupational safety and health, particularly inthe sectors most likely to employ low-skilled labor (such as agriculture, construc-tion, and small-scale manufacturing), can help considerably in raising the sustainedperformance and productivity of workers and, hence, workers’ own motivation andsense of workplace value.16

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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However, if the previously mentioned cost-saving evidence is not enough to redi-rect company attention and commitment toward improved global workforce healthand safety, these firms should understand that liability for health and safety neglectin foreign operations may be decided by their home country’s unsympathetic andmore globally responsible courts, as U.S. MNCs have found under the Alien TortsClaims Act. U.S. MNCs have witnessed a seemingly unending spate of individualclaims litigation supported by this act against Union Carbide due to the Bhopal di-saster. The threat by this home country legislation, more than pressure from thegovernments of developing countries that host foreign operations, has forced firmsto tighten safety procedures, upgrade plant safety precautions, and education work-ers and communities.17

JOB INSECURITY AND DISPLACEMENT

The availability of meaningful employment to protect an individual’s ability to earna decent wage and support personal and family livelihood represents one of the mostfundamental global ER concerns. Job insecurity and the threat of worker displace-ment, which certainly are nothing new and pose a perennial challenge, have increasedto a great degree in developing countries due to the pressures and opportunities ofglobalization as well as technological advancements (for example, through globaloutsourcing of internal company work and automation).18 Job loss and worker dis-placement are major concerns in developing countries, such as China, where entryonto the world business competitive stage places great pressure on increased effi-ciency of operations and away from inefficient, overstaffed state-owned and subsi-dized enterprises.19 Although companies must maintain a primary focus on economicsurvival and profitability, they still should keep in mind their social responsibility tominimize the negative impact of their business decisions on the well-being of thehost countries and communities where their operations are located. As we will ex-amine in more detail later related to handling employee terminations and redundan-cies, companies should work closely with local governments to lessen the negativeimpact of operation closures and job loss and, where possible, actually contribute inthe long run to greater skill development within the local labor force.

INFLUENCE OF MNCS AND UNIONS ON GLOBAL ER

The practice of ER throughout the world can differ dramatically, and in each busi-ness environment context the practice of ER can have several external sources ofinfluence.20 On the other hand, internal company factors such as company culture,general management philosophy, and prevailing management style also can be veryinfluential in determining ER practices despite heavy government regulation andunion presence in the external context, such as the case of McDonald’s in Germany.21

As mentioned earlier, the parties that constitute the primary employment relation-ship underlying an organization’s ER are the company and employees, both indi-vidually and collectively, such as when employees are organized in a union. Both theemployees and the MNC (including managers and executives representing the MNC

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 311

who determine and carry out company policy) have a principal influence on thenature and duration of the employment relationship in which ER takes place. Al-though we now will focus on the part played by MNCs in the employment relation-ship, we want to emphasize the importance of the active voice and participation ofindividual employees in determining the nature of this relationship and how they aretreated and managed in organizations. And although unions are often consideredexternal to the primary company-employee employment relationship, we also willexamine their influence on ER because they often represent the voice of employees.Finally, MNCs should also be familiar with other external forces, as discussed inchapter 1, such as governments, intergovernmental organizations, and NGOs, whichcan have a powerful impact on MNC ER decisions and activities. International andlocal NGOs in particular, compared to the overall waning influence of unions, areincreasingly vocal and influential in bringing changes and improvements in employeesafety and rights protection.

ROLE OF MNCS IN GLOBAL EMPLOYEE RELATIONS

How should MNCs be involved with the pressing ER issues and challenges presentedearlier? Certainly they should expect to follow local regulations of all kinds, includingthose regarding the treatment of employees. But do MNCs have an ethical responsibil-ity to respect and adhere to the same home country ER practices in their host countryoperations, even though the host country might not have any such standards or regula-tions, or if they have them, ignore them through virtually nonexistent enforcement? Inour competitive global economy, the decisions and actions of MNCs entering newcountries can become moral dilemmas. However, as MNC operations come under greaterscrutiny around the world, consumers, shareholders, communities, and other stake-holders increasingly demand that corporations play a positive role in promoting andupholding high corporate social responsibility.22 As we indicated in chapter 1, we be-lieve that for a long-term sustainable strategy of success, companies must adopt as partof their core values common high standards for managing their global human resources,including ER practices, that will meet or surpass individual country standards andregulations. Nike, Wal-Mart, and Reebok are just a few companies that have beenunder intense pressure to improve their global workforce ER acts, both in their homecountries and abroad. And overall, they have responded very favorably to this pressure,raising the expectations for corporate social responsibility.

In its own home country of the United States, Wal-Mart has been charged, basedon its own workplace data patterns, with a huge class-action lawsuit for sex discrimi-nation related to compensation and career advancement.23 Although companies likeWal-Mart may truthfully deny conscious discriminatory practices, their human re-source records and data patterns, unless they can be reasonably defended, may stillprovide sufficient evidence of discrimination and adverse “disparate impact” againsta legally protected group, such as women or minorities. Even though business lead-ers and managers may not intentionally put individuals from one or more groups at adisadvantage, deep cultural influences may still affect human resource decisionsleading to systematic unfair discrimination. Disparate or adverse impact, with its

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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focus on actual statistical patterns of ER practice, is a tool to surface unfair discrimi-natory practice regardless of conscious intention or motive.24

More recently Wal-Mart agreed to pay $11 million to settle a lawsuit accusing itof being complicit in contracting janitorial services for its stores where the con-tracted employees were illegal aliens. Another lawsuit has sought redress for theundocumented employees, claiming they were underpaid and worked overtime with-out extra pay. Many of the immigrants from nearly twenty countries, includingMexico, Brazil, the Czech Republic, China, Poland, and Russia, said they generallyworked from midnight until 8 A.M. seven nights a week, cleaning and waxing floors.25

Wal-Mart was held liable despite its claim of not knowing about the illegal status ormistreatment of these contracted workers—they still were held accountable for thequality of ER and treatment of the employees who performed their company-con-tracted services. Thus, companies must not feel comfortable in merely being un-aware of malfeasance and having a clear conscience regarding their ER practices butshould actively examine their employment practices on an ongoing basis, includingthose covering their contracted workers, to ensure that legal and ethical ER practicesand standards are followed.

IMPORTANT MNC PRACTICES FOR EFFECTIVE GLOBAL ER

Earlier we examined the issue of employee health and safety in global ER, includingboth serious costs of the neglect of worker health and safety and benefits to theorganization when these needs are addressed. There also can be serious costs toorganizations in the form of lowered productivity, fines and legal costs, and damagedimage and reputation (potentially affecting both consumer behavior and future re-cruitment) when companies do not effectively attend to other important and ofteninterrelated ER matters as employee involvement and development, open communi-cations, employee correction and discipline, and employee termination. Althoughthese areas merit much more examination than space will allow in this chapter, wenow will briefly provide recommendations for effective global ER practice that canguide initial planning and future, more detailed study.

Health and Safety

We believe that organizations should have an ethical commitment to protecting em-ployee health and safety and minimizing the risk of work-related harm and injuryassociated with work assignments wherever they take place around the world. Be-sides reducing operating costs associated with workplace accidents and injury, atten-tion to health and safety also can point to opportunities for work process improvementand innovation. For example, manufacturing accidents often are caused when em-ployees, whether motivated by incentives or simply an intrinsic desire to improveproductivity, find new ways to reduce manufacturing time and may step outside ofsafety guidelines that were developed for the old, less-efficient process. With anongoing global commitment and attention to worker safety, managers will work closelywith employees to ensure that the employees are appropriately protected as they try

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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out new ideas for company improvement. Alcoa, the world’s leading producer ofaluminum, is convinced of this link between attention to workplace safety and pro-cess innovation, yielding increased productivity. Since 1988, it has made a commit-ment to safety as the company’s number-one priority and performance measure. Withthis strong commitment, productivity has soared, as have cost savings due to a dra-matic reduction in accidents. Since their start of this strategic focus on safety, Alcoahas reduced lost workday injuries by 90 percent. Seventy-five percent of Alcoa’s 487locations worldwide had zero lost workdays in 2002, ten times better than the aver-age record of its industry peers.26 We now will examine critical areas to achievesuccess in planning and dealing with employee health and safety.

Management Support. An effective health and safety effort requires an invest-ment in time and resources (human and financial), which should be budgeted for andallocated appropriately by management. In addition, management commitment tohealth and safety is critical at all levels, both in active enforcement of program rulesand in providing good examples for following those rules. To help reinforce man-agement support at all levels, managers should be held accountable by the organiza-tion for their contribution to health and safety.27 At Alcoa there is an ongoing showof this support from senior management through their attention to safety. Managersof worldwide Alcoa facilities that are underperforming in safety measures and whereinjuries are reported can expect a telephone call from a member of upper manage-ment, with a particular emphasis on discussing possible means for improvement.When safety has improved, managers also are contacted by senior management toprovide positive reinforcement.28

Ongoing Risk Assessment. Organizations and their workplaces can differ dramati-cally, and so can the nature of risks to health and safety. Sources of worker harm andinjury can vary greatly, for example, between expatriate engineer assignments inColombia and jobs in meat-processing plants in Portugal. The nature of risk andhealth hazard can also change with internal changes to work processes and to thesurrounding environment. Therefore, management at local operations should ana-lyze work situations carefully on a regular basis to identify and protect against po-tential risks to health and safety as well as to keep accurate records of work-relatedaccidents or injuries to identify trends and adjust accordingly. Some general trendsacross diverse industries have found that older employees tend to have fewer acci-dents. In addition, most accidents occur during the first month of work; the longer anemployee has worked for a job, the lower the accident rate.29 These general trendspoint to the possible need for special supervisory attention directed toward youngeremployees and the need for effective communications and training as early as pos-sible to minimize early employment risk.

Regular Audits and Inspections Based on World-Class Standards. Related to theprocess of ongoing risk assessment, companies should conduct regular inspections andaudits, both planned and unannounced, at their operations at home and abroad, includ-ing operations where company work has been subcontracted. Such regular assessments,

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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314 CHAPTER 11

based on high company standards, can help keep safety high in the consciousness ofpracticing managers and employees alike and is especially important for maintainingcompany control over safety in distant and outsourced operations. Particularly whensuch inspections and audits are conducted and reported by impartial groups external toa company, the reports can carry greater credibility, enhancing company reputationsand raising standards and expectations in the global business environment.

Baxter International is a global manufacturer of pharmaceutical and biomedicalproducts, with sixty-four manufacturing facilities and about 48,000 employees lo-cated throughout the world. In response to a request by a stockholder group wantingincreased assurance that data presented to the public is accurate, Baxter now usesexternal validation with an external consultant to assess and report its performancein environmental protection and employee health and safety. This external consult-ant, ERM Certification and Verification Services (CVS), maintains overall qualitycontrol of the audit process through recently created verification protocols for use byall their auditors assessing Baxter’s facilities. These verification protocols build glo-bal consistency and help minimize inevitable auditor differences when working indifferent geographic areas. Mattel uses both internal monitoring and independentaudits of safety in its worldwide toy-manufacturing facilities (owned and contracted),mostly found in the Pacific Basin. Its regular public reports of these internal inspec-tions and independent audits include the identification of problems and cases ofcompany safety-code violations as well as action for resolving these situations. Thishonest public disclosure supports Mattel’s commitment and reputation for workersafety and sets a high standard for other companies.30

Ongoing Communication and Training. Very early communications and trainingare especially critical to counter the high risk of accidents during the first month ofservice. In addition, communication and training should continue on an ongoingbasis, particularly as ongoing risk assessment identifies new areas for concern andnew rules for prevention. Each safety incident or injury should serve as a learninglesson, not as an occasion for blame and faultfinding. This beneficial learning shouldbe shared through company-wide electronic newsletters, announcements, workshops,and other means both for individual employee awareness and learning and for orga-nizational learning through improved policy and practice. Pacific Northwest Na-tional Laboratory credits a weekly article feature, “Lessons Learned/Best Practices,”in its internal electronic newsletter with greatly increasing staff awareness and in-volvement in creating a safer, healthier work environment.31

Information sharing and skill training with ongoing skill review in such areas asstress management, managing work/life balance, first aid, crisis management, andgeneral health and wellness training for all employees also can be particularly im-portant in lowering health-related costs as well as in minimizing loss in times ofemergency.32 Beyond their initial thorough training, supervisors in particular shouldreceive ongoing information and training to help support their key role in safetyprogram implementation, including training on new company policies and practices,dealing with possible alcohol and drug abuse, and preventing and dealing with work-place aggression and violence.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 315

Employee Participation. Employees at all levels should have a clear expectation ofupholding and contributing to effective company safety and health. Employees at lowerlevels often are the closest to work processes and have the best vantage point for iden-tifying possible areas for concern in work design and opportunities for improvement.They therefore should be encouraged to provide suggestions for improvement. Effec-tive employee involvement can also be gained through their participation with manag-ers and safety and health specialists on committees that meet regularly to review safetyand health concerns and make improvement recommendations to management.33 At aminimum, employee safety and health concerns about their own work should be con-sidered seriously, and no employee should feel forced into working under unsafe con-ditions until the concerns can be thoroughly assessed and alleviated.

Employee Feedback and Incentives. A basic step in employee involvement is sim-ply providing employees with regular feedback on their performance—both safetybehaviors and outcomes—in promoting a safe and accident-free working environ-ment. Such regular feedback sends a clear message of the importance of safety andthat all employees play a crucial role. The Kenora Pulp and Paper Mill of Ontario,Canada, generated feedback by using a questionnaire completed by a broad crosssection of employees and based on a model of safety management used by the world’ssafest companies. This survey produced quantitative data on the state of theorganization’s safety management, including the effectiveness of safety practicesand overall management commitment. Based on this feedback, the company madeimportant changes that drastically improved its safety performance. Before this sur-vey feedback intervention in 1994, the mill had an average of seven lost-work inju-ries per year. In the following five years it had no lost-work injuries, and total injurieswere reduced by 75 percent.34

Financial incentives and other forms of reward (such as recognition and prizes)for exemplary individual, work team, and organizational performance in contribut-ing to lowering accident rates and safety and health care costs also have been foundto be effective. In combining employee feedback incentives with high employeeinvolvement, companies may engage in internal cross-departmental or divisionalcompetitions as well as external competitions (both national and international) forawards and recognition—the latter serving as a high source of intangible goodwillimage value in local communities. For example, the Bangalore-based electronicsdivision of Bharat Heavy Electricals Ltd. has been awarded the British SafetyCouncil’s International Safety Award for the third consecutive year in recognition ofits achievements in corporate health and safety. Such internal and external competi-tions can effectively serve to energize the MNC’s global workforce toward improvedperformance in health and safety. However, management should be very careful tonot allow the incentives, competition, and potential negative feedback to discouragehonest reporting of accidents.35

Employee Assistance Program Support. The concept of an employee assistanceprogram (EAP) centers around providing professional assistance to employees whoare experiencing emotional or psychological difficulty that interferes with both em-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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ployee well-being and overall productivity. Several common situations associatedwith these personal difficulties include alcohol and drug abuse, marital or familydifficulties, stress, financial troubles, depression, and grief. Consistent with the trendof outsourcing many HR services, companies frequently contract with professionalEAP services firms that provide counseling and other services to employees who arereferred by their companies. These external EAP services also provide a context ofanonymity and confidentiality that may be lacking in internal company counselingand advisement services. The purpose of the EAP is to acknowledge that with anylarge group of employees, at some point a percentage of employees will be debili-tated by some difficulty such as the previously listed, and a responsible and ethicalorganization should assist employees in overcoming these personal challenges withthe same human consideration as given with a physical illness.

In EAP application to the global workforce, many employers begin with their expa-triate employees to assist in preventing costly failed assignments and difficult repatria-tion. However, with a commitment to a truly global workforce, employers should provideconsistent benefits and services throughout their employee populations, with EAPsthat serve local workforce needs as well as those of expatriates. Because EAPs dealwith personal and highly confidential matters, it is essential that, besides meeting glo-bal quality standards, they are designed to fit local views regarding counseling, per-sonal relationships, religious preferences, and style. For example, in some countriestelephone counseling is preferred, whereas in others a face-to-face approach is essen-tial. Local laws, benefit plans, and confidentiality requirements are also important.

While individual problem solving is an important part of EAP services, employeeassistance professionals also may work with managers, union representatives, and HRprofessionals to solve more challenging problems in the workplace such as alcoholismat work, group conflicts, disruptive employee behavior, and other critical incidents.Beyond ethics and social responsibility, EAPs have demonstrated cost-wise that com-panies are far ahead when they work to help employees overcome these challengesrather than ignore them and then suffer much more serious costs in dramatically re-duced productivity, low morale, and new employee replacement and training.36

Employee Involvement and Development

An important ethical practice of ER that also has important bottom-line benefitsincludes the design of work, where possible, that is personally satisfying and mean-ingful beyond just providing a job to support personal and family livelihood. Theactive involvement of employees in providing input and making decisions related totheir work has been found to lead to increased levels of motivation and job satisfac-tion and is associated with heightened worker productivity and retention and low-ered absenteeism and tardiness. Employee involvement is also critical for gainingvaluable ideas and information for organizational improvement—often informationthat is not visible to management. To make the best use of trained and experiencedemployees, organizations often change their organizational structure, removing mul-tiple layers of management and replacing hierarchy with decentralization of deci-sion making. Employees are encouraged to make decisions on the spot without

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 317

consulting their supervisors, who often are less directly involved with customer trans-actions. This premium placed on using the involvement and knowledge of lower-level company employees is voiced by Nerio Alessandri, founder of the Italianmultinational Technogym: “The best ideas come from the people in the field or onthe production line. The lower the position, the better the idea.” Involvement also cancontribute to employee understanding of and commitment to new company direc-tions and initiatives. Examples of productive worker involvement include autono-mous and semi-autonomous individual and group work designs as well as participationon special task forces, ad hoc committees, and ongoing problem solving and qualityenhancement groups leading to improvements at the workplace and in the surround-ing community.37

GLOBAL WORKFORCE PROFESSIONAL PROFILE 11.1

BRENDA R. BLAIR AND EMPLOYEE ASSISTANCE PROGRAMS

Brenda R. Blair is president of Blair Consulting Group of College Station, Texas, where she leads agroup of consultants in working with all kinds of organizations in the United States and abroad for thedesign, development, and enhancement of international EAP and work/life balance services. Sheworks closely with major MNCs and providers of EAP and other ER services in consulting and trainingservices. Blair earned a bachelor’s degree at Kalamazoo College in Michigan, where she had anearly, very influential study-abroad experience in Nigeria. She also continued on for her MBA atNorthwestern University in Evanston, Illinois, as well as a CEAP (Certified Employee AssistanceProfessional) from the Employee Assistance Professionals Association. Blair carries with her consid-erable personal international experience, having lived in Switzerland, Belgium, the Netherlands, andGhana. Her active international work has included the following:

• Consultation on EAP and work/life services for local host country nationals• Program review to assure that employer services are consistent across countries yet

responsive to local needs• Program design and implementation• Identification and evaluation of EAP and work/life vendors in different countries• For EAP vendors, marketing surveys of opportunities in different countries• Consultation on mergers, acquisitions, and international strategies for EAP and work/life service

delivery• For international vendors, consultation regarding how to provide services in the U.S.

environment• Escorting international professionals on site visits to U.S. employers and vendors to observe

EAP and work/life services• Consultation on forming alliances with other international EAP and work/life service providers

Blair’s work has involved projects in the United States, Canada, France, Japan, South Africa, andthe United Kingdom. In addition, an important part of Blair’s work involves contributing her expertservices and networking at major professional organizations in her field, such as the EmployeeAssistance Professionals Association, where she has been a member for about twenty years and hasserved as a local chapter officer; the Association of Work/Life Professionals; and the Society forHuman Resource Management, where she is an active participant in SHRM’s online Global Forum.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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The active involvement of employees frequently calls on their utilization of higher-level skills in problem solving and decision making. Such involvement often canresult in their development and use of professional and managerial skills and compe-tencies that contribute to their job satisfaction, job advancement within the organiza-tion, and career security and marketability outside of the organization shouldemployment be terminated due to layoffs and downsizing. On a larger scale, thiscommitment to employee development is also aimed at advancing the skill and knowl-edge level of the local labor force wherever company operations are located.

Open Communications and Grievance Process

Productive and ethical ER practices provide for open communications where em-ployees can be heard and their problems and complaints presented without fear andgenuinely addressed. Because performance appraisal can be a very useful tool forproviding honest feedback aimed at individual employee performance improvement,so too should organizations be open on a regular basis to organizational climate andemployee satisfaction surveys to gain employee input on how to make the workplacemore meaningful and rewarding as well as how to improve company operations.Where more targeted input and feedback are desired from employees, such as whenthe organization is planning to introduce new work practices or update employeebenefits, employee focus groups or special employee task forces can be used. Be-sides contributing to a more open and trusting organizational culture, such two-waygenuine communication with clear opportunities for employee voice and input hasbeen linked in studies across many different cultures to individual perceptions offairness and job satisfaction as well as key company performance indicators of pro-ductivity, profitability, customer satisfaction, and employee retention.38

Of course, cultural differences can affect employee inclination to provide honestinput, especially aimed at correction and improvement of superiors and the organi-zation. For some employees, especially those from high power-distance cultures,providing such “constructive” criticism directly face-to-face is still criticism, and itmay be perceived in a negative light associated with disrespect and lack of loyalty.Managers should therefore be flexible and ready to adjust their methods for access-ing employees’ candid voice and input. For example, one American manufacturingexecutive in Los Angeles with a large concentration of immigrant Mexican employ-ees uses a third-party approach for gathering useful corrective input from his workforceindirectly—yet still with their clear understanding of the reporting role of this trustedthird party.

Whether or not employees are represented by a union in their work environment,they should feel free to bring forth legitimate concerns and complaints without in-timidation or fear of retaliation. Many organizations utilize “hot line” or “whistleblower” telephone numbers where employees can report waste, fraud, or abuse bysuperiors anonymously. Organizations should develop clear procedures, both infor-mal and formal, for airing employee dissatisfaction and complaints. Many organiza-tions strongly encourage employees to first share their concerns on a more informalbasis with their direct supervisor, because most problems are due to some form of

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 319

miscommunication or misunderstanding. Supervisors should be trained in interper-sonal communication skills to actively listen and work jointly with employees toresolve concerns at this informal level.

Sometimes problems are not able to be resolved satisfactorily at this initial infor-mal level with the immediate supervisor—especially when a supervisor might be theprimary source of the employee concern. Therefore, a more formal grievance proce-dure for voicing and resolving the employee concern should be used. Although unionworking environments tend to have more clearly outlined employee grievance pro-cedures for seeking redress, all organizations can benefit by developing and commu-nicating clear, simple, and formal grievance procedures. Such procedures should beadapted to local legal and cultural conditions and especially should be designed withinput from all levels of employees to increase credibility and acceptance. Theseformal step-by-step procedures aimed at eventual grievance and dispute resolutionmight include such features an internal ombudsperson, who can investigate claimsor act as an intermediary between employee and management and recommend pos-sible solutions; an open-door policy, where an employee can take concerns to levelsof management above the immediate supervisor; peer review panels composed mostlyof an employee’s peers to increase perceptions of fairness and ensure that theemployee’s perspective is heard; and arbitration, often the last step, where an agreed-upon unbiased third party examines the evidence and makes a final decision forresolving a grievance dispute.39 Advantages of such effective formal procedures in-clude the following:

• A mechanism for employee concerns to be handled fairly and quickly withinagreed parameters before they develop into major problems and larger disputes

• Explicit recognition of employee’s protected right to raise grievances• A clear step-by-step process to guide employees in raising a grievance, and

specific action to be taken if agreement is not reached at each level• Greater consistency of procedural justice and practice across the organization—

especially important for multisite organizations• Documentation and maintenance of records that are useful in grievance resolution• The meeting of legal obligations, with grievance procedures that are customized

to local governmental statutes40

Employee Correction and Discipline

Mistakes happen. Although they should be avoided, there still is nothing more natu-ral in organizations than errors. Ethical and productive ER practices for dealing withemployee correction and discipline should be based on this perspective, with theprimary focus on performance-problem resolution and improvement and a minimalemphasis on blaming and punishment. If some form of punishment is used in disci-pline, it should be used only as a means to encourage future desirable performanceand discourage undesirable performance, not to mete out some form of just retribu-tion. The most important purpose of employee correction and discipline is perfor-mance improvement—there is no room in the enlightened professional organization

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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for managers who seek revenge. Although following an effective disciplinary proce-dure can even result in employee job termination, the focus is still on work perfor-mance improvement.

Employee correction, an important step that should precede discipline, involvesproviding feedback that the present performance is not satisfactory. Employee cor-rection may also include additional direction and joint problem solving betweenemployee and supervisor to bring about desired performance. Unlike employee dis-cipline, correction should have no punishment or threat of future disciplinary mea-sures if performance is not improved. Misunderstandings and miscommunication ofexpectations are very common, and usually employee correction will occur simplywhen employees learn that their performance needs improvement. From their basicneeds of self-esteem and self-efficacy, employees generally will desire to performeffectively and have a positive impact and will feel disappointed when they learnthat their performance is unacceptable or falls short of expectations. Therefore, atthis early correction stage, punishment or even the threat of a future negative conse-quence brings only unnecessary added anxiety and may even result in resentment.

A primary cause of performance problems leading to the need for often stressful anduncomfortable disciplinary action is failure in performance management. As men-tioned previously in chapter 9 on global workforce performance management, em-ployees should be given performance feedback on a regular basis. However, one of thecommon weaknesses of supervisors is their reluctance to give negative feedback, hop-ing that employee performance problems will somehow go away. Unfortunately, thisautomatic correction without clear feedback is seldom the case, and typically the per-formance problem only grows and becomes more entrenched, becoming a major em-ployee disciplinary crisis. The effective company-wide practice of performancemanagement should therefore be a high organizational priority and supported and rein-forced by ongoing management training and accountability measures.

When initial efforts at employee correction do not bring about a desired change inemployee performance, employee discipline should begin. We now will consideruseful points to keep in mind in planning and carrying out employee discipline.

Develop, Update, Communicate. A first step to effectively managing employeediscipline is to have a disciplinary system in place that is sensitive and adapted tothe unique needs, legal regulations, and cultural practices and expectations of thelocal workplace. For example, some employee behaviors may be very offensiveand seriously upsetting to workforce morale in some cultural contexts yet go com-pletely unnoticed and have no disturbing effect in others. This disciplinary systemshould clearly identify unacceptable employee behaviors and the consequencesfor employees who engage in them. To ensure relevance and credibility and toavoid accusations of unreasonable treatment and discrimination, discipline shouldbe based on employee behaviors that are pertinent to the company’s local opera-tion and, where possible, based on critical incidents of past employee behavior (orbehavior experienced by other local companies) that led to negative company con-sequences. Based on changing social trends and ongoing performance manage-ment data and experience, the disciplinary system should be reviewed regularly

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 321

and updated when appropriate. For example, the relatively recent entry of theInternet into the workplace has led to potential employee behavioral problems thatdid not exist before, such as time-wasting Internet surfing and downloading ofquestionable material.

Finally, the nature of the disciplinary system, including the behaviors to avoidand their negative consequences if engaged in, should be clearly communicated toemployees. Simply burying them in an extensive employee handbook or addingthem to the typical information overload of a new employee’s first-day orientationis not enough. Separate and ongoing company training and information “refreshersessions” should also be used to ensure that communication is clear for especiallycommon behavioral problems as well as for more serious infractions, such as sexualharassment and other forms of workplace harassment and discrimination. In fact,in some cases regular and reasonable company efforts to inform and train employ-ees regarding inappropriate and illegal discriminatory behaviors can serve to pro-tect or at least limit the company against legal liability in the event of a futurelawsuit.41

Progressive Discipline. Some first-time infractions may merit immediate termi-nation, such as violence in the workplace, fraud, or stealing. However, such an ex-treme consequence may be inappropriate and often illegal for other less seriousbehavior problems at their initial or early occurrence. In addition, given costs foremployee replacement and training, companies are usually much better off using adisciplinary system that is aimed at coaching and working with employees for areasonable period of time to improve performance problems. Also, when disciplin-ary measures are perceived by other employees as excessively harsh, serious dam-age may be done to overall employee morale and productivity. Disciplinary systemsshould therefore reflect a progressive movement of negative consequences, witheach consequence appropriate for the particular order of infraction occurrence (forexample, first, second, or third time occurrence) and intended to be of minimallysufficient strength to effectively discourage future occurrence of the particular per-formance problem,42 as illustrated in Figure 11.2.

Hot Stove Analogy. The analogy of a hot stove can be useful in ensuring the effec-tiveness of a disciplinary system.43 As a hot stove, a disciplinary system should havethe following features:

• Warning. As we would naturally want to warn another person unfamiliar withour surroundings against touching a nearby hot stove, so too should inappropri-ate workplace behaviors and their negative consequences be clearly communi-cated to employees.

• Sufficiently Hot. If a stove is not sufficiently hot, the food will not be cooked ina timely manner. If it is too hot, the food will be burned. In like manner, negativeconsequences for unacceptable behavior should be minimally strong enough toprovide an adequate disincentive against their future occurrence, yet not toostrong or extreme so as to cause resentment from the employee and others whoare aware of the discipline.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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• Immediate. As the touch to a hot stove should provide immediate feedback,there should be an immediate response to an employee’s performance infrac-tion, with a clear explanation for why the discipline is being given. A significantdelay in discipline may cause the employee to continue the behavior, because heor she concludes erroneously that the infraction is really not a problem.

• Consistent. A person who touches a hot stove will consistently feel pain. Thelack of consistency in applying discipline can cause perceptions of unfairness orlead to employee notions such as, “Maybe I’ll get away with it this time and notget into trouble.”

• Impersonal. It matters not who the person is who touches the hot stove—he orshe will still get burned. Likewise, an effective disciplinary system is impartialand does not discriminate or play favorites, treating each employee the samewhether she is the daughter of the head janitor or of the company president.

Documentation. Effective documentation is an essential tool in managing disci-pline. This practice maintains a professional and orderly manner in the process andcommunicates its seriousness to the employee. Effective documentation also pro-vides clear evidence if needed for review by other parties, such as in a grievanceprocedure, and is especially important in defending manager and company actions incase of litigation. There have been useful recent human resource information systemdevelopments (such as software and the Intranet) to help facilitate a supervisor’seffective documentation work for performance management and for managing dis-cipline in particular.44 When performed effectively, documentation as part of em-ployee discipline should follow these guidelines:

• Describe in behavioral terms the infraction and background in which it tookplace, including whether this was the first or repeated offense. Be specific, and

Figure 11.2 Example of Progressive Discipline: Employee Tardiness

Order of Occurrence Negative Consequence

First Time Discussion with employee to be sure policy is clear—most employeesnaturally feel bad and sorry at this initial step, which is a sufficientlynegative consequence. No threat or external punishment.

Second Time Warning that if tardiness continues, a note about this performanceproblem will be placed in employee’s personnel file for documentationand available for future review.

Third Time Note about continuing tardiness problem is signed by supervisor andemployee and placed in employee’s personnel file. Warning thatsubsequent tardiness within a given time period may result in one weeksuspension without pay. Document signed by both parties and placedin employee’s personnel file.

Fourth Time One week suspension without pay. Warning that future tardiness withina given time period may result in immediate termination. Documentsigned by both parties and placed in employee’s personnel file.

Fifth Time Immediate termination of employee.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 323

include all pertinent facts, such as dates, times, witnesses, and other personsinvolved.

• Describe what must be done to correct the situation and by what date.• Describe the consequence being applied and the next consequence if the infrac-

tion is repeated.

Ongoing Fairness and Support. In minimizing the perceived adversarial nature ofemployee discipline and to maintain a fair and professional process, disciplinaryaction should be handled with utmost confidentiality and provide a continuing op-portunity for the employee to state and clarify his or her case. Disciplinary actionshould not be taken without a preceding thorough and impartial investigation of thefacts, and employees should be given the right to appeal at each step of the disciplin-ary process with a clear explanation of procedures to be followed.45 Above all, em-ployees should sense genuine support and desire on the part of supervisors for theemployees to successfully overcome the work performance problem, noted by theirongoing coaching and offer of assistance, joint problem solving for problem resolu-tion, and statements of confidence in the employee to succeed.

Employee Termination and Displacement

Despite their effective efforts in correction and discipline, managers may finallyconclude that there is no other recourse than to terminate an employee due to mis-conduct or inability to perform the work effectively. Or business circumstances maychange, leading to the need for termination unrelated to employee performance, suchas in the case of a need to downsize the organization due to a downturn in the economyor loss of business, or due to a merger or acquisition or automation of lower-skilljobs in which the employee’s position becomes redundant and unnecessary. In what-ever situation leading to employee termination, pertinent local and country regula-tions should be examined carefully to avoid costly lawsuits and fines and to be awareof other consequences, such as mandatory severance payments. Employment law inmany countries makes it very difficult to terminate an employee, even for just cause,such as serious employee misconduct, and requires significant advance notice andconsultation with appropriate regulatory and labor bodies. Regarding statutory sev-erance payments, many countries require that companies, regardless of reason fortermination, provide payment to the former employee based on such factors as em-ployee age, years of employment with the company, and last rate of pay. Countryseverance requirements can differ dramatically, with some employees with twentyyears of company service receiving around $50,000 in mandatory severance pay-ment, while in another countries employees with the same length of service receivetwice this amount or more.46

Where employee termination is deemed necessary on the grounds of redundancy,before approval is granted many countries and regional trade agreements (especiallythe European Union) have legal requirements for providing detailed information andconsultation with individual employees targeted for redundancy, appropriate laborregulatory bodies, and labor interest representatives. Often consultation is required

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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to begin a minimum of thirty to ninety days before the dismissals may take effect.Required consultation and information may cover the following:47

• Reasons for the proposed redundancies• Numbers and descriptions of employees to be made redundant• Proposed method(s) and criteria for determining employee redundancy• Proposed methods of implementing dismissals, and period over which dismiss-

als are to take place• Redundancy payments to be made other than those required by law• Ways in which the effects of redundancies may be mitigated (such as through

outplacement services, which may provide emotional counseling, career coun-seling and job-search assistance, retraining, retirement and financial manage-ment advice)48

• Possible means in which redundancies may be reduced or avoided

The last bulleted item requires a thorough analysis of possible alternatives to re-dundancy that can lessen or even avoid the negative impact of the dismissals. Thesealternatives may include (1) natural wastage or attrition, a rather slow and untargetedapproach depending on the natural loss of employees through retirement, resigna-tion, and so on; (2) voluntary early retirement, often facilitated by a generous incen-tive offer to employees of a minimum age in targeted departments or areas ofredundancy; (3) transferred redundancy, or “bumping,” where an employee in anon-redundant position volunteers and is allowed to trade places with an employeetargeted for redundancy; (4) redeployment, or relocation of the employee to suitableemployment in another place of work within the company, possibly in a differentpart of the country, and often retaining, unless appropriately compensated by thecompany, the same level of pay and benefits under an “acquired rights” requirementexisting in many countries, particularly in Europe and the EU; (5) retraining, for thepurpose of facilitating redeployment within the company or placement with a differ-ent employer or even self-employment; (6) work-sharing, as has traditionally hap-pened in many Asian countries, where all workers’ total hours are diminished to fitthe reduced work demand and then shared, such as all employees changing to athirty-five-hour work week; (7) voluntary part-time, where individuals voluntarilyreduce their total number of working hours, such as in a phased retirement situationwhere older workers, with an incentive, gradually reduce their working time andresponsibilities toward retirement; (8) coordinated leave, such as with periods ofpaid and unpaid leave (for example, maternity, paternity, family care, career breaks,sabbaticals, and professional development) where different workers are still retained,however, in a temporarily inactive status, thus reducing the number of active work-ers under a diminished work demand; and (9) job-sharing, a variation of work-sharing,where two or more individuals share a job for an indefinite period.49

Regardless of the reason for termination, efforts should be made to make the ex-perience as comfortable and supportive as possible. Face saving is important in allcultures, and any forms of humiliation—intentional or unintentional—should be care-fully avoided. Efforts also should be made in cooperation with local labor regulatory

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 325

agencies to minimize the potentially negative impact on local communities of largenumbers of dismissals. Attention also should be given in counseling and other sup-port services to other typically neglected victims of downsizing strategies—the sur-vivors of layoffs—who often suffer added stress and anxiety due to increaseduncertainty and work overload, resentment toward the company, and even feelingsof guilt. In fact, Finnish researchers found evidence that those who survived layoffswere five times more likely to die from heart disease or stroke in the four years afterthe cuts than employees whose workplaces weren’t affected by downsizing.50 Al-though an ethical and socially responsible, proactive ER approach to discipline andtermination, as well as other major ER practices, might prove more costly in theshort term, it can bring many benefits in the long term with improved companymorale, better external image and reputation, and minimal costly litigation.

ROLE OF LABOR UNIONS IN GLOBAL EMPLOYEE RELATIONS

As illustrated in the opening scenario of this chapter, the presence and potentialinfluence of labor unions are carefully considered when MNCs are selecting loca-tions for their manufacturing facilities. In a competitive global business market, MNCscarefully consider possible costs and disadvantages associated with unions in a givenlocation. And governments in both developed and developing countries, in their in-terest in increasing foreign direct investment as well as in maintaining the domesticinvestment of their own companies, also are concerned about the possible negativeimpact of unions. As indicated in Global Workforce Challenge 11.2, we note howWal-Mart has found the form of union representation in the People’s Republic ofChina, heavily influenced by the Chinese government, to be very favorable to itssignificant foreign direct investment and expansion plans there.

Labor union structures, priorities, laws, and practices can differ dramatically withincountries and from country to country.51 Some unions are organized on a commonindustrial basis, such as the United Auto Workers in the United States and Canada.Others are organized on a common occupational basis, such as the National Union ofTeachers in the United Kingdom. Some countries require a union presence in the work-place, such as in Germany where the federally legislated principle of co-determinationdictates union representation on corporate boards and worker councils for lower-level operational decision making. Other countries disallow independent labor unionformation, such as in China where independent organizational movements (includ-ing religions) that may enter in potential conflict or compete with a communist re-gime are strongly and forcefully discouraged.52 In some countries the union focus isrestricted to employee personal interests, such as protecting employee wages andsafeguarding working conditions, whereas in other countries unions are much moredeeply involved in social and political activism. For example, the behavior of tradeunions in Bangladesh, characterized by political activism and features momentousstrikes known as hartals, have played a crucial role in most political changes in thatcountry.53

In several instances unions have formed close working relationships with man-agement and actually lowered company costs through effective contributions in staff-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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ing and managing employee discipline. A particular advantage to world labor ofhaving unions in the global economy is that they keep pressure on companies againstgoing for shortsighted profitability at the expense of worker interests and for secur-ing labor rights that could mitigate the negative effects of globalization. This posi-tive pressure role of labor unions in protecting worker interests in company ER washighlighted in a report commissioned by World Bank, which reviewed more than athousand studies on the effects of unions and collective bargaining. Based on the

GLOBAL WORKFORCE CHALLENGE 11.2

WAL-MART ACCEPTS UNIONS IN CHINA

Wal-Mart, the world’s largest retailer, has earned a strong reputation for avoiding unions—evenclosing a store in Canada that threatened union certification. Wal-Mart claims that rather than haveunion representation, it encourages its workers to have “direct communications with the company,”where issues of concern are taken seriously and followed up with prompt action. However, in China,with its economy’s blend of rapid industrialism and capitalism mixed with authoritarian communism,Wal-Mart apparently has found a union to its liking. In November 2004, Wal-Mart gave an officialstatement related to unions unlike ever made before: “Should associates request formation of a union,Wal-Mart China would respect their wishes and honor its obligation under China’s Trade Union Law.”The company agreed to have its 20,000 Chinese workers represented, if requested, by the All-ChinaFederation of Trade Unions, a body dominated by the Chinese Communist Party.

Wal-Mart has ambitious expansion plans for its stores in China, where it lags behind its global rival,France’s Carrefour. Wal-Mart also uses China as a major sourcing center for its U.S. stores, buyingabout $15 billion worth of goods in 2003 from the Chinese mainland. At one stage, according to acredible source, Wal-Mart purchases from China were worth about 10 percent of the country’s totalexports to the United States.

The All-China Federation of Trade Unions says that all companies, foreign and local, are requiredto establish a union, using funds from a 2 percent levy on wages. The Federation claims to have 123million members, a result of the monopoly the government has allowed in the representation ofworkers’ interests. Due to their potential threat to the centralized power of the state, independentunions are banned in China. (Remember what Poland’s Solidarity trade union did in the 1980s tobegin opening up Eastern Europe to democracy and the overthrow of communism?) The Federationunions in China traditionally have been an instrument for the Communist Party to control workersrather than a vehicle for agitation and strikes, which are almost never allowed. And companymanagement has considerable influence on Federation unions through their ability to appoint theirchoice of individuals to union leadership positions.

China’s economic environment has experienced dramatic changes, and with it has come a sharpincrease in labor unrest. Government figures for 1992 show there were 8,150 cases involving labordisputes. A more recent report claims that this figure jumped to 300,000 cases in 2003. Critics believethat the role of the state-sanctioned Federation unions isn’t to channel labor’s discontent intoachievable gains in worker safety, quality of working life, and standard of living but rather to containdiscontent and make labor compliant to the employer’s benefit, thus supporting a national goal ofincreased foreign direct investment.

Source: Adapted from H. Meyerson, “Wal-Mart Loves Unions (in China),” Washington Post, 1 De-cember 2004, A25; R. McGregor, “Wal-Mart Gives in to China’s Union Federation,” Financial Times,23 November 2004, available at http://yaleglobal.yale.edu/display.article?id=4920 (accessed January8, 2005).

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 327

report’s findings, Ken Georgetti, president of the Canadian Labor Congress, madethe following labor union endorsement:

Workers who belong to unions earn higher wages, work fewer hours, receive more training,and have longer job tenure. Union membership fights discrimination and closes the wage gapbetween women and men. People join unions because it improves their standard of living andadds to their quality of life. Better pay and working conditions, improved access to benefitslike pensions and medical insurance, opportunities to become better workers and better citizens—these are the advantages people have when they come together in solidarity.54

Studies of the union effect on workplace health and safety in the United Kingdom,Canada, and the United States have documented that union-supported workplacehealth and safety committees have had a significant impact on reducing injury rates.55

Unions also may have indirect influence on company ER policy and practice throughtheir direct influence on local governments to enact legislation and develop regula-tions favorable to employees. With their advocacy for the personal interests of unionemployees who also are voting citizens, unions can wield considerable power overlocal government leaders who desire the support of the electorate.

Union Strengths and Vulnerabilities

Of fundamental concern to MNCs, labor unions may restrict MNC strategic optionsand flexibility in four primary ways:56

1. By influencing local government requirements for wage and benefits levelsto the extent that labor costs become noncompetitive. This is the presentsituation in Germany, where many firms, including German-based ones, areopting to move business facilities elsewhere.

2. By restricting the ability of companies, through union influence on govern-ment regulations, to unilaterally change employment levels, such as throughlayoffs.

3. By limiting the company’s ability to utilize active employee participationand involvement initiatives that have demonstrated great effectiveness inquality and process innovation and strategy implementation, due to the claimthat such employee group initiatives constitute company-sponsored unionactivity and interfere with legitimate and protected union activity, even innonunion organizations.

4. By forcing MNCs to develop parallel operations in different countries todecrease vulnerability to powerful unions, thus hindering the MNCs’ increasedefficiencies of global integration.

Nevertheless, the beginning of the twenty-first century generally finds organizedlabor with diminished economic power and political influence from decades earlier.Labor has decreased dramatically in influence as the globalization of production hasweakened organized workers’ bargaining power to dictate terms to employers. For

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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example, if computer programmers in a developed country like the United Statesthreaten company flexibility and profitability by forming a union, their work can beoutsourced to such countries as India and China where more traditional unions arenot found. Or if a national union threatens to strike, effectively shutting down MNCoperations in one country, the company can increase production in its parallel opera-tions in other countries, thus greatly limiting the negative impact of the strike. Andin many developing countries local governments might be reluctant to support theunions for fear of losing potential jobs and capital inflow as well as hard currencyfrom exports.57 Overall, the global trend has been away from collectivism and tradeunionism. Strikes have declined, and the fastest-growing sections of the economyhave been nonunion.58

Other factors also can explain the weakening roles of labor unions. Well-educatedand trained knowledge workers generally find themselves in one of two circumstancesin the global economy. In one circumstance they might be independent contractorswho are highly skilled contingent employees, busy investing in their “human capital”as they make themselves consistently employable. These people generally considerthemselves to be more akin to sole proprietors than to a collective body of workers.They may network with similarly situated persons, but they will not show solidaritywith them. These people usually work on a project-by-project basis. In the past, work-ers primarily sought job stability and remained with a given company for an average oftwenty years. Now, many of these knowledge workers can be “free agents,” with anaverage tenure of only five years or less. Unlike traditional laborers, they may notshow significant emotional attachment or organizational loyalty to their current com-pany. In fact, individual independent contractors may not be supportive of the idea ofa labor union because they move from one job and one place to another and think oftheir pay as a price for their service and not as an ongoing wage.59

If the knowledge workers are standard rather than contingent employees, theymay find that their employers have created such a work-friendly environment thatmost employees will not consider unions necessary. As companies recognize thevalue of human capital over physical capital, employers are very much interested inhelping employees achieve personal growth and fulfill personal needs in order toretain the most capable people inside their company.60 Furthermore, they encourageemployees to identify with the company by providing them with such benefits asstock options and profit sharing. These employees would identify the company’ssuccess with their own individual career success. Such a spirit of cooperation be-tween management and workers is well known as kyosei among Japanese compa-nies, in which individuals and organizations live and work together.61 Therefore,under these circumstances, employees are unlikely to sympathize with and organizelabor unions, whose interests conflict with employers.62

Potential Challenge of Union Global Solidarity

Although MNCs are free to merge, consolidate, and grow larger, individual unionsthemselves cannot easily form solidarity for combined influence across boarders forseveral reasons, including the following:

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 329

Regulatory Restrictions. National labor laws typically restrict exercising extrater-ritorial jurisdiction, and national laws regulating unionization vary substantially fromcountry to country. For example, European firms have tended to deal with laborunions at the industrial level whereas U.S. firms have done so at the firm level.

Reluctance to Yield Autonomy. National union leadership is typically very reluc-tant to yield power and usually prefers the autonomy to deal with labor practices ina manner that is most familiar. This autonomy is also threatened by fundamentalpolitical and philosophical differences, such as between a union in one country com-mitted to a communist form of economy and a union committed to capitalism inanother country.63

Conflicting National Union and Labor Interests. In their vocal opposition to glo-balization, national unions from developed countries have been accused of not beinggenuinely concerned about the health and safety of workers in less-developed coun-tries but in reality wanting to protect their own domestic union jobs that contribute totheir power base.64 In addition, labor interests in one country can differ significantlyfrom those in another country, such as with labor in a more affluent Western countrybeing interested in quality of work/life issues, whereas labor in a poorer, developingcountry being much more motivated by basic livelihood and survival needs. At leastfor the immediate short term, workers and their representing unions in poorer coun-tries would likely not be very sympathetic to the bargaining demands of their workerand union counterparts in much more affluent countries.65

Nevertheless, with greater cross-border collaboration and a consistent shift awayfrom the traditional “IR” of industrial relations to a greater emphasis on interna-tional relations, a stronger global union influence may be felt in the future, providinga critical step toward the establishment of a broader atmosphere of internationalpeace and harmony.66 There are increasing examples of cross-border mobilization ofworkers represented by different unions. Such was seen when thousands of unionmembers at more than sixty worksites in France, Canada, and the United States joinedan International Day of Action to show support and solidarity for the United AutoWorker (UAW) union members’ contract negotiation efforts at Norton Abrasives inWorcester, Massachusetts, a subsidiary of the French-based Saint-Gobain Indus-tries. According to UAW President Ron Gettelfinger, “International solidarity is theperfect answer to the company’s so-called decentralization policy. The well-beingof these workers and the community in which they live is not just a local issue. Itmatters to other Saint-Gobain union members and to workers everywhere.”67

Another significant development has been the recent merger of the World Con-federation of Labour (WCL), which holds a significant presence in developing coun-tries, with the world’s largest labor coalition, the International Confederation of FreeTrade Unions (ICFTU). This newly combined labor coalition will represent about180 million workers in 233 affiliated organizations in more than 154 countries andterritories worldwide, with top-priority goals to secure fundamental rights for work-ing people across the world, develop international labor standards, improve genderequality, help end workplace discrimination, and aggressively address instances of

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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exploitation by MNCs. The ICFTU maintains close links with the European TradeUnion Confederation (ETUC—which includes all ICFTU European affiliates) andthe Global Union Federations, which link together national unions from a particulartrade or industry at the international level. As unequivocally expressed recently bySharan Burrow, the first woman president of the ICFTU:

Where governments fail to hold multinational corporations to account for decent labor stan-dards, the international trade union movement will take up these issues and defend the rightsof people who are denied fair wages and decent working conditions. Companies that portraythemselves as good corporate citizens in developed nations like Australia, the United States,and Europe while exploiting workers in export processing zones and in less developed coun-tries will find themselves the focus of internationally coordinated trade union campaigns.68

SUMMARY

The primary focus of employee relations in global workforce management is on thenature in which employees’ personal interests, rights, and needs are protected andserved by MNCs, which also are influenced by other external factors such as unionsand government legislation. Critical challenges for human and worker rights in today’sglobal workplace include forced labor, harmful child labor, workplace discrimina-tion, health and safety hazards, and job insecurity and displacement. As part of theircorporate responsibility, organizations should work hard to address and resolve theseserious challenges, including cooperating and working closely with government andother non-profit organizations. MNCs also can do much to optimize the effective-ness of their ER policies and practices related to employee health and safety, fair andnondiscriminatory practices, open communications, employee involvement and de-velopment, effective management of discipline, and, where necessary, termination.

QUESTIONS FOR OPENING SCENARIO ANALYSIS

1. Often trade unions are equated with the voice of company employees. Asyou consider the GM Daewoo workers in the opening scenario, is this equiva-lent comparison always accurate?

2. How has union strength in South Korea changed over time? Is this changeconsistent with the global trend?

3. What particular advantages did GM hold over the KCTU before and after theacquisition of Daewoo Motors?

CASE 11.1. AT DOMINO’S, ER BEGINS WITH MANAGERS

Turnover is a chronic and costly headache for fast-food businesses, which rely on anarmy of low-paid and frequently part-time workers. A harsh boss, a mean colleague,or a boring day can cause workers who earn around the minimum wage to quit forsimilar pay elsewhere. In the United States, average turnover per year for most large

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 331

and mid-size companies is about 10 percent to 15 percent. But at fast-food chains,rates as high as 200 percent a year for hourly workers aren’t unusual. Some compa-nies are tackling the problem with a higher starting wage. But Domino’s Chief Ex-ecutive Officer David A. Brandon says that although pay is a factor, “you can’tovercome a bad culture by paying people a few bucks more.” He believes the way toattack turnover is by focusing on store managers—hiring more selectively, coachingthem on how to create better workplaces, and motivating them with the promise ofstock options and promotions. High turnover hurts the bottom line. It costs money torecruit, hire, and train people and undercuts service when inexperienced employeesdon’t work as efficiently. Mr. Brandon commissioned research that showed the mostimportant factor in a store’s success wasn’t neighborhood demographics, packaging,or marketing but the quality of its store manager. “When that position is turning overat a high rate, the ripple effect of that is enormous,” he says. His strategy seems to beworking. By last year, the company’s overall turnover had declined to 107 percent.

Domino’s is trying to hire and train people like manager George Escobar. To givethe store a friendlier feeling for employees, George says he bought boxes of tea bagsand put them on a small folding table in the back with hot water and sugar. Hediscovered that his assistant manager brightened up when talking about his pets. SoGeorge bought a pet fish for the store. Seeking a way to discipline employees with-out alienating them, he bought a pair of dopey-looking, oversized black-framedglasses. They’re called the “mistake glasses,” and workers have to wear them whenthey make errors. The joke is that if you couldn’t see what an obvious mistake youwere making, you need glasses. “You want to make it like a fun environment but atthe same time, you get your point across,” George says. He says no one has everrefused to wear the glasses. He also avoids correcting employee mistakes in public.

Regional manager Rob Cecere coaches his managers constantly. His stores are nowaveraging sales of about $20,000 each week, up from $8,500 four years ago. Often hegives common-sense advice: treat employees respectfully, be polite and patient. Hehammers home that it’s not the pay that makes employees stick around, it’s their rela-tionship with their manager. “You’ve got to make sure they are happy to come to workfor you.” Dileep Kumar Kalludi, a Domino’s manager in New Jersey, picked up a tipsheet at one of the company’s management meetings, which he later tacked on hisoffice wall. “Management is communicating, communicating, communicating,” it reads.

QUESTIONS FOR CASE ANALYSIS AND DISCUSSION

1. Why should ER also be considered part of the overall picture of employeecompensation and rewards to motivate employee productivity and retention?

2. Why is the direct supervisor and manager role so critical for effective ER inorganizations?

3. What are important managerial practices for effective ER as exemplified inthe Domino’s case?

Source: Adapted from E. White. “New Recipe: To Keep Employees, Domino’s Decides It’s NotAll about Pay; Pizza Chain Attacks Turnover by Focusing on Managers,” Wall Street Journal, 17February 2005, A1.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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332 CHAPTER 11

CASE 11.2. AGE DISCRIMINATION IN THE WORKPLACE

The graying of the workforce, with fewer younger replacements in the pipeline, isdrawing more and more concern from governments in developing countries. A grow-ing number of retired workers drawing state social benefits and not contributing tonational productivity and tax revenues represent an increasing drag on national econo-mies. One measure that countries are using to slow this effect is through changedpersonal tax measures, such as recently in the United States, which allows workersto continue working full-time and also draw social security payments without theprevious daunting tax penalty against drawing a full salary. Age discrimination in theworkplace also is recognized as a strong work disincentive for older employees, andcountries also are moving to pass and enforce stronger regulations to fight this dis-couraging workplace malady. In the United Kingdom, stronger laws banning agediscrimination are going into force, and it’s not a moment too soon, according to theEmployers’ Forum on Age. By the time the new regulations take effect, it is pre-dicted that British workers aged between forty-five and fifty-nine will be the singlelargest group in the labor force.

But for too many, reaching fifty still means being thrown on the scrapheap. Areport by the United Kingdom’s National Audit Office found that 2.7 million peoplebetween fifty and pension age were out of work. Of those, 700,000 to one millionsaid they would like to work, whereas 200,000 were actively seeking work. Thereasons why the workforce is aging are clear. The baby boomer generation of thesixties is reaching retirement age, medical advances mean that people are healthierfor longer, and the pensions crisis in Britain is forcing people to work into old age.These factors all create difficulties for employers, who often believe that olderworkers will take more sick time off, cost more to retire, and will not accept takingorders from younger managers. “There’s a fear about how to manage someone asold as your parents, so firms must invest in people-management skills,” says SamMercer of the Employers’ Forum on Age. The reality is that older workers areoften hugely committed and motivated, may have better communication skills,and, as retailers such as B&Q have found, can be a hit with the public. They alsohave fewer accidents in the workplace, representing a lower risk to workers’ com-pensation costs.

The problem of finding a job in later years is well illustrated by Dave Evans, anengineer with British Gas. As he turned fifty, he was made redundant. Though ableto work as a freelance contractor, he found his age a barrier to landing a permanentjob. “When I applied for a job, I didn’t mention my age, but they would still saythey were looking for someone younger,” he says. “It was quite a low time.” YetDave, now fifty-eight, is proof of how employers are waking up to the reality of anaging workforce. He was rehired in 1999 by British Gas to cope with a drasticshortage of engineers. And two years ago he joined a scheme to encourage olderengineers to stay with the business. Those prepared to do irregular shifts or morephysical work are paid more, whereas others have the guarantee of regular hoursand lighter duties.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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GLOBAL EMPLOYEE RELATIONS 333

QUESTIONS FOR CASE ANALYSIS AND DISCUSSION

1. Besides their commitment to ethics and social responsibility, why shouldcompanies be motivated to eliminate age discrimination in the workplace?

2. Why does age discrimination pose a threat to the economic health of devel-oping countries?

3. What measures can companies take to reduce discriminatory treatment andother negative workplace features to provide a more positive working envi-ronment and encourage the retention of older workers?

Source: Adapted from N. Paton. “British Bosses Face New Laws Banning Age Discrimination,”Knight Ridder Tribune Business News, 28 November 2006, 1.

RECOMMENDED WEBSITE RESOURCES

Labor and Industrial Relations Networks (www.orcinc.com). ORC’s labor and industrial relations net-work offer member companies the chance to share best practices, discuss on-going issues of laborand industrial relations, and focus on common concerns. These groups are multi-industry.

International Labour Organization (www.ilo.org/public/english/standards/norm). Answers five basicquestions about the ILO’s original function since 1919 on developing and promoting globally asystem of international labor standards: what are they, how are they enforced, why are they needed,where do they come from, how are they used. Click “sitemap” to find specific information related tosuch areas as child and forced labor, industrial relations, worker safety and health, and protection ofwomen workers.

International Confederation of Free Trade Unions (www.icftu.org). Provides current worldwide newsand information on global trade union concerns and activities related to worker and trade unionrights, labor standards, child labor, and health and safety at work. Provides detailed information toassist local union organization and development across industries and trade sectors, as well as tofacilitate multi-union collaboration across national boundaries in support of worker issues and tocounter the influence of MNCs.

International Industrial Relations Association (www.ilo.org/public/english/iira). Sponsored by the ILO,promotes the study of industrial and employee relations throughout the world through conferences,publications, member online networking, and study groups.

European Agency for Safety and Health at Work (http://europe.osha.eu.int/legislation). Presents infor-mation on several EU directives, standards, and guidelines for protecting the health and safety ofEurope’s workers.

Human Rights Watch (http://hrw.org). Independent NGO with headquarters in New York and officesthroughout the world, dedicated to exposing abuses and protecting human rights around the world,including in work situations. For current international initiatives related to worker rights, health, andsafety click Global Issues, then Labor & Human Rights.

Employee Assistance Professionals Association (www.eapassn.org). World’s oldest and largest mem-bership organization for employee assistance professionals, with approximately 5,000 members inthe United States and more than thirty other countries. Hosts an annual conference, publishes theJournal of Employee Assistance, and offers training and other resources to enhance the skills andsuccess of its members and the stature of the employee assistance profession.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-04-10 16:29:27.

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2006. M

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