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LABOR RELATIONS FROM A LIVING SYSTEMS PERSPECTIVE

Lane Tracy
Department of Management Systems
Ohio University
Athens, OH 45701

Labor relations consists of the set of interactions between an employing organization, such as a business firm or government bureau, and its employees. Some of these interactions may be governed by law or by a formal labor contract; others are a matter of custom. The set of interactions comprises such matters as work rules, wages, benefits, hours of employment, working conditions, safety and health, definition of authority and responsibility, grievance processes, and provisions for termination of employment. Viewing labor relations from a living systems perspective provides an enhanced understanding of these interactions and their functional relationship to the involved systems, In particular, two very different systems of labor relations emerge, depending on whether employees are regarded as components of, or inclusions within, the employing system.

Keywords: living systems, template, employer, employee, labor relations, component, inclusion.

Labor relations involves several levels of living systems, including individual organisms (i.e. employees, employers, and labor union representatives), work groups, and organizations (i.e. business firms, government agencies, and labor unions). Communities and societies are also involved as suprasystems and regulators.

Labor relations can be approached either as a legal and economic system defined by communities and societies, or as a behavioral system that evolves from the interaction of employees and employers. For reasons that, I hope, will soon become evident, this paper will be based upon the latter approach.

Boundary of the Firm

One of the critical subsystems of any living system is its boundary. The boundary "separates the system from its environment. It surrounds and protects vulnerable components, acts as a barrier to free movement of matter, energy, and information in and out of the system, and filters inputs and outputs by allowing some but not others to pass." [5, p. 23]

Although this definition seems very explicit, exactly what constitutes the boundary of an organization is by no means obvious. Presumably certain groups within an organization, such as security guards, personnel selection specialists, receptionists, and receiving dock workers are part of the boundary, as are artifacts like gates and fences. But that is a matter of definition of the system. We could extend the boundary to include buyers and salespeople in the field, who screen purchases and orders. Or we could contract the boundary to protect only the inner sanctum of the organization, the headquarters.

. Being within the boundary of a living system is not a sufficient indication that something or someone is part of the system. Business firms normally welcome customers within their boundaries, but do not accord them status as components of the system. Rather, they are inclusions. An inclusion is "a part of the environment...surrounded by a system and totally included within its boundary." [4, p. 33]

Components or Inclusions?

A question that must be raised with respect to labor relations is whether employees are components of the system or merely inclusions. The fact that such employees participate in processes required by various critical subsystems of the organization would seem to indicate that they are components. Yet it is possible for a living system to disperse such critical processes to other living systems. The system need only have access to all of the critical processes. Thus, it is possible to regard employees as independent contractors who enter the system temporarily to carry out their work, much as a plumber might enter your home to fix a leaky pipe. From this viewpoint the system consists only of owners and employees who have a relatively permanent stake in the organization. Even most of the components of the boundary are dispersed to other systems.

Employers have an opportunity to define the boundary of the employing organization as they set its template. The design of the organization may include employees as integral components or simply as inclusions. That is, employees may be regarded as part of the system or as part of the environment temporarily contained by the boundary of the system. When employees are considered to be components, they are usually put on salary and given assurances of permanent or long-term employment. When treated as inclusions, however, employees are typically paid on an hourly or piece-rate basis and given no assurances of continued employment.

Other concomitants of these two treatments of employees are the effects on training, promotion, trust, and dispersion of decision-making authority within the decider subsystem. When employees are considered to be components of the system, money spent on training and educating them is deemed to be an investment in human resources. Such employees are groomed.for promotion; a career progression ladder may be designed for them, They are trusted to understand the goals of the organization and to have its best interests at heart. Thus, important decisionmaking authority and responsibility may be delegated to them.

Employees who are seen as inclusions, on the other hand, are typically given only enough training to perform their current tasks. Their opportunities for promotion are limited. They are assumed to have only a narrow understanding of organizational goals and to be more interested in pursuit of their personal goals. Their loyalty to the organization is suspect. Thus, they are given little authority or responsibility. These differences in treatment of employees as components or as inclusions are summarized in Table 1.

The definition of employees as components or inclusions varies not only between organizations but also for different groups of employees within an organization. In the United States and many other Western Societies it is common to draw a line between managerial and operative employees. Managerial employees typically are put on salary, often are given extensive training with the expectation of promotion, and are delegated considerable authority and responsibility; obviously they are seen as integral parts of the organization. Operative employees are usually paid on an hourly basis, laid off at will, given only specialized training and restricted opportunities for promotion, and allowed to make decisions only about certain limited aspects of the tasks they perform.

Interaction Employee as component Employee as inclusion
Pay Salaried Hourly rate or pay for specific output
Job security Assurance of continued or lifetime employment Employment at will, no assurance of continued employment
Training Considered an investment; general education as well as training provided Considered an expense; limited to current tasks
Promotion Expected; employees groomed for promotion; career progression ladder Limited opportunities and expectations
Goal orientation Trusted to understand and be committed to organizational goals Assumed to have a narrow understanding of, and little commitment to organizational goals
Participation in decisions Involved in important decisions; given significant authority Little or no involvement in important decisions; given no significant authority

Table 1. Treatment of employees as components or inclusions.

The Japanese style of management, about which so much has been written, seems to differ from the Western style specifically in the way it treats employees [6]. In at least some large Japanese firms both managerial and operative employees are given assurances of continued employment, are instructed in the goals of the organization and trusted to adhere to those goals, and are consulted on important decisions. Furthermore, the firm takes an interest in the lives of its employees and tries to provide security for their families, thereby including even the employees’ families within the boundary of the firm.

Western firms have begun to copy certain aspects of Japanese management, but perhaps without fully comprehending the different system definition that lies behind them, For instance, many firms in the United States have tried Quality Circles (QC), Quality of Work Life (QWL) committees, Employee Involvement (EI), Total Quality Management (TQM) and various other forms of participative management. Although sometimes successful, these efforts often founder because they are not accompanied by other elements such as trust and assurances of continued employment [7]. If American employers understood the basic implication of these participative programs, namely that all employees are to be counted as integral components of the system, they would either redesign other elements of the organization or else reject QC, QWL, EI, and TQM as foreign concepts.

Of course, there have always been some firms in the United States that treated operative employees differently. Small family-owned and operated firms often include the extended family as part of the enterprise, There are paternalistic firms such as the Hershey Corporation that view the entire community as part of the system [2]. And there are firms like IBM and Hewlett-Pachard that have extended guarantees of continued employment to the operative employees, designed extensive career ladders for them, offered training and educational benefits, and delegated considerable authority to them. There is a continuum of systems with respect to employer treatment of employees, Yet it is based on a dichotomy with respect to whether those employees are or are not part of the system.

Labor Unions

Historically, labor unions developed in the West because a majority of employers defined and treated operative employees (and sometimes others such as supervisors and engineers) as inclusions. Such employees were simply "hired hands" to be used and discarded at will. Since the owner of the firm did not consider their interests, these employees saw a need for an organization that would represent them. They also recognized that they must act in concert, because individually they lacked the power to influence the firm. Thus, labor unions were formed precisely because employers did not consider the hourly-paid employees to be part of the firm, even though many of the employees felt loyalty to the firm and considered themselves to be part of it.

Early unions tried various templates. Some were democratic institutions, other were more hierarchical and autocratic. Some pursued the members’ interests through collective bargaining, some through political action, some by setting up a parallel system of benefits, some by seeking to overthrow or modify the capitalist system of government that favored property owners. In the United States a template based on union democracy and collective bargaining gradually emerged as the most viable design, but in Western Europe conditions often favored political action while in Eastern Europe benefit societies evolved as the preferred design.

For labor unions involved in collective bargaining there was further evolution depending on characteristics of the workers whom they represented and the structure of the firms and industries with which they dealt. In the U.S. relatively skilled workers tended to prefer craft unions organized to represent their particular interests, including such matters as apprenticeship programs and restricted entry into the craft. Their negotiations were often with single firms; thus, the local unions needed to be strong, Less-skilled workers employed in mass production industries, having less intrinsic power, saw that their best chance lay in industrial unions and industry-wide or regional bargaining where a strike would have maximum effect. Industry-wide or regional bargaining implied the need for a strong, centralized national organization and greater discipline. The key in either case was that the union organization had to match the relevant employers in structure, since labor unions are symbiotic rather than totipotential systems. That is, the basic resources that support a union's processes derive ultimately from the success of the employer(s).

A challenge currently facing labor unions is the rise of multinational corporations. Assuming that many of these corporations continue to regard their operative employees as inclusions, there is a need for unions to represent these employees. Thus far, however, it has proven very difficult for unions to organize themselves on a multinational basis in order to match the structure of the corporations. Part of the problem is that each nation has its own laws regulating labor relations, requiring different local structures and processes in each nation [3]. The collective bargaining process depends strongly on good information bases, but the availability of financial information about corporate activities varies widely across nations. Finally, union organizations in each country have been protective of their own turf, making cooperation difficult [1].

Regulation

The involvement of communities and societies in regulating labor relations requires some examination. Communities and societies generally have purposes and goals with respect to economic productivity and growth. Disruption of production by strikes and violence is regarded as counterproductive. On the other hand workers are citizens with rights to protection from exploitive employers. The challenge of governments is to devise a system that protects rights of employees and employers while minimizing disruptions.

Various systems of regulation have evolved. In Canada and the United States reliance is placed on the collective bargaining process to resolve disputes without loss of production. Government interference is minimal, except when violence erupts or there is prolonged stoppage in a critical industry. In other nations, however, government control is more direct, Australia, for instance, relies extensively on a public system of arbitration to resolve disputes and set wages and working conditions {8]. In nations with labor-dominated governments, legislation directly mandates many of the benefits that, in the United States, are subject to collective bargaining.

With the rise of multinational corporations, some of which are larger and wield more economic power than many small nations, it would seem prudent for nations to work toward agreement on some common elements of labor relations policy. To date, that does not seem to be happening. Instead, many nations attempt to compete for business investment by offering less-restrictive labor relations environments. The need for economic development and jobs overwhelms concerns for the rights of employees.

One area in which agreement might be reached is whether employees should be regarded as components of the employing organization or as inclusions within it. This is an abstract question that might raise fewer passions. It has important consequences, however.

If it were agreed that all employees should be defined as integral parts of the organizations that they serve, then regulation would be directed at providing assurance of long-term employment, absent evidence of serious malfeasance. Employees should then be salaried and have opportunities to become part of the ownership of the business. They should have prescribed rights to promotional opportunities. Employers should be required to consult employees on decisions that affect them.

If employees are components, they should by put on salary, given assurances of continued employment, offered opportunities for training and promotion, and encouraged to participate in decision making. They do not need a labor union. If they are inclusions, on the other hand, they can be paid on almost any basis (e.g., hourly, piece rate, fixed contract), laid off at will, expected to train themselves, and required to follow orders. They should also be expected to form a Labor union and bargain collectively with the employer in order to protect their interests. What clearly does not work well is a system in which employers treat employees as inclusions, but regulation by the community or society assumes that they are components, or vice versa.

[1] R. F. Banks and J. Stieber, 1977, Multinationals, Unions, and Labor Relations in Industrial Countries. Ithaca, NY: New York State School of Industrial Relations.

[2] J. Grossmann, 1987, "Richard Zimmerman: Candy Man." American Way, Sept. 15: 27-34.

[3] M. J. Levine, 1987-88, "Labor Movements and the Multinational Corporation: A Future for Collective Bargaining?" Employee Relations Law Journal, Vol. 13: 382-398.

[4] J. G. Miller, 1978, Living Systems. New York: McGraw-Hill.

[5] J. L. Miller and J. G. Miller, 1992, "Greater than the Sum of its Parts: Subsystems which Process both Matter-Energy and Informaton." Behavioral Science, Vol. 37: 1-38.

[6] W. G. Ouchi, 1981, Theory Z. Reading, MA: Addison-Wesley.

[7] R. B. Peterson and L. Tracy, 1988, "Lessons from Labor-Management Cooperation." California Management Review, Vol. 31, No. 1: 40-53.

[8] G. Serauss, 1988, "Australian Labor Relations through American Eyes." Industrial Relations, Vol. 27 (Spring): 131-147.